Rate: the spread on mortgages with the fixed rate
The EURIRS rate is one of the reference financial indices used to calculate the interest to be paid on a loan for the purchase of a property. Like any loan, the loan also requires the recognition of an interest rate to the bank that provides the amount: this rate can be variable (if interested, click here for the trend in mortgage rates ), then linked to the performance of certain international rates, or fixed, which does not change for the duration of the loan. The bank then applies a spread on the reference rate to obtain a gain from the loan.
The interest paid by the user will be equal to the reference rate plus the spread
This means that even those who choose a fixed rate will have to pay attention to a reference rate: it is precisely the EURIRS rate, which means Euro Interest Rate Swap and is often also referred to simply as the IRS rate . EURIRS rates are a measure of banks’ financing costs over different time periods: 1 year, 3 years, and so on. There is therefore not only one EURIRS rate, but different versions. All, however, calculate the cost of a particular financial transaction, the interest rate swap, which financial companies use to protect themselves against fluctuations in financial markets. Therefore, when the bank proposes a EURIRS with a specific maturity, it is good to inquire about that specific rate and compare it with both its past values and those of the other versions of the EURIRS rate.
Anyone who signs a mortgage is therefore interested in the effect this rate has on his own loan
The EURIRS rates are used to calculate the installments of a loan and establish the interest to be paid at a fixed rate: what really matters is therefore the rate chosen at the time of signing the contract , since it will no longer change, unlike what happens with the variable rate. However, to understand the convenience of using a fixed rate it is advisable to keep the forecasts on the EURIRS rate under control : if it is estimated that the rate may fall below its current value, a fixed interest may be less convenient. If a rise is expected, using the lowest current rate would be beneficial.
In addition to forecasts, it may also be useful to take visions of the historical trend of the EURIRS rate , to understand how it has behaved in the past and to judge the convenience of its current value. To do this, we advise you to consult the EURIBOR website, where the historical values of the EURIRS rate are reported year by year.