Big rises in mortgage payments

THE average mortgage in the Balearics will rise by 228 euros monthly if maximum rates are reached in the European Union.
The Balearics is the fifth autonomous region where the average mortgage will rise most if interest rates keep going up, as predicted by the Central European Bank (BCE) for the next few months. Madrid, the Basque region, La Rioja and Catalonia are the only regions which will suffer higher increases than the Balearics according to a report from the Spanish Mortgage Association (AHE). In fact, the average mortgage in the Balearics (which is 148'385 euros) could rise by 228.40 euros monthly if the highest Mortgage Reference Index (IRPH) is applied by all mortgage companies registered since the introduction of Monetary Union in Europe. The average mortgage in the whole of Spain, which is 130'000 euros over 25 years could rise to 200.10 euros per month. First time buyers with low rate mortgages are at the greatest risk from rises in interest rates, while those buying a second home are those least exposed to fluctuations in lending rates, according to the AHE. Some 93.24 percent of mortgages taken out in 2005 were at a variable rate for the first 6 or 12 months, 6.14 percent were mixed (nearly all with an initial fixed rate period of 2 or 3 years and then the rest at a variable rate), and only 0.62 percent at a fixed rate. These figures show that nearly all the loans were of variable rate from one year or less. Because of this the AHE has developed an indicator to evaluate the risks those who take out a variable rate mortgage are taking. This indicator reveals that, if the highest IRPH is applied, the monthly payments would rise by an average of 288.40 euros in the Balearics.