The IRS (Interest Rate Swap) Index, also known as a financial swap of interest rates 5-year, is a mortgage benchmark that came into effect in 2012 with the aim of replacing the Euribor, TAR, CECA and IRPH.
Its calculation is at 5 years and its value varies less than the Euribor, providing the financial system with greater security thanks to the fact that it shows interest rates without the risk premium. This means that in times of significant economic turmoil the index will be less stressed than the interbank market rate.
By not suffering alterations due to the risk premium, it will provide clearer expectations about the monetary and financial evolution, providing some Mortgages more stable and with less serious revisions. And it is that the mortgages referenced to the IRS to 5 years get used better to the strong changes of the economic situation.
What is the IRS mortgage for?
What the IRS 5-year mortgage intends is to provide users of banking services with the option of contracting mortgages at a fixed rate that will provide them with stability in the payment of installments. This interest rate has less variability than Euribor, which will reduce the risk of quota revisions.
The decision to change the Euribor for the new index in newly constituted mortgages must be made by the financial institution. They will have the possibility of using any of the current indices. However, when the mortgage is referenced to Euribor, it will be kept in the contracts already established, with the same conditions, unless the customer and the bank in question decide otherwise. Mortgages referenced to IRPH of entities will also remain unchanged, since this index does not disappear.