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Why mortgage payments in Spain could increase by up to €120 a month

The Local
The Local - [email protected] • 5 Sep, 2022 Updated Mon 5 Sep 2022 09:59 CEST
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The continued rise of the Euribor rate means that monthly mortgage payments could be set to get more expensive.


In Spain, Euribor is the interest rate most often used to work out mortgage payments and to calculate both variable and fixed rates.

It is anchored to the interest rate set by the European Central Bank, and, as we are now seeing, quite responsive to global economic events. Banks across Europe are currently mulling whether, when, and how by how much to raise interest rates in order to try and ease inflationary pressures.

READ MORE: What the Euribor rise means for property buyers and owners in Spain

Euribor is the interest rate that banks in the Euro Zone use to lend to each other, so when the base rate goes up, the Euribor does too, which sends mortgage interest rates across the Eurozone rising. 


Rising rates

The Euribor rate at the end of August was 1.25 percent - its highest value in a decade and a rate not seen since 2012 after long periods of negative values - which could in turn increase monthly mortgage payments by thousands of Euros depending on your rate, length, and type of mortgage. 

Experts believe that the Euribor rate could rise to 1.249 percent by the September, an increase of more than 1.72 percent in just eight months.

Mortgage repayments

This will, of course, make mortgage repayments more expensive.

Take for example a €150,000, 25 year mortgage. Repayments could rise by €121.46 per month if the mortgage is reviewed every year, which would mean an annual increase of €1,457.52. 

The Euribor indicator has increased in expectation that the European Central Bank (ECB) will further raise interest rates to to try and control inflation (the 9.1 percent rate in August was a Eurozone record) and could do so quite considerably.

Economists fear a steep increase in ECB interest rates could push the Euribor rate over the 2 percent threshold.

READ ALSO: Spanish mortgages – Ten things foreigners should know before getting one

Yet, despite the interest rates pushing up the Euribor and by extension mortgage repayments, and the inflation-triggered economic malaise affecting most of Europe, property purchases in Spain continue to rise.

The mortgage industry had its best June performance in 12 years, giving out 42,767 loans - 12 percent more than June of 2021, according to the figures from Spain's National Institute of Statistics (INE).

One way to weather the storm of interest rate increases is to change your mortgage from a variable to a fixed rate, either by negotiating with the your bank or by changing bank altogether – a process known as subrogation.



The Local 2022/09/05 09:59

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