Euribor up for second month, but mortgage payments down for most

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A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate predominantly used to calculate mortgage payments in Spain, rose 2% in May compared to the previous month, taking it up to 1.249%, the highest level it has been since last September. This is the first time since July 2008 that Euribor has risen for 2 consecutive months.

Despite rising for 2 months, Euribor is still not far above the record low of 1.215 it hit in March. It is still 24% lower than it was a year ago, and 77% lower than it was in July 2008.

Because Euribor is still lower than it was a year ago, repayments on a typical annually resetting mortgage (120,000 Euros, 25 years, Euribor +0.8%) will fall to around €510/month, saving 24 Euros a month, or 288 Euros a year.

If Euribor keeps rising, it won’t be long now before borrowers starting seeing their monthly payments increase, albeit modestly at first.

Euribor is an interbank lending rate based on interest rates set by the European Central Bank (ECB). Base rates are currently at 1% but the ECB is expected to put them up during the course of 2010. Even though base rates haven’t yet been touched, Euribor is starting to rise as banks get nervous about the state of the economy and lending to each other.

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New mortgage lending

New mortgage lending rose 2.4% in March compared to the same month last year, according to figures from the National Institute of Statistics (INE). That is the third consecutive month of annualised growth in mortgage lending, a good sign for the market.

On a monthly basis there were 53,513 new mortgages signed in March, down 2.4% compared to February, so on a month-on-month basis, the news isn’t so good.

The average loan value was 116,345 Euros, a fall of 2.6% compared to last year. Overall new mortgage lending was 6.2 billion Euros, down 0.3% on last year.

The average interest rate was 3.91, 23% below a year ago, and 1.5% lower than February.

More than 95% of new mortgages were variable rate

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