Mortgage payments up, new mortgage lending down

A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, may not have budged last month compared to August, but it is up by 12.6pc compared to 12 months ago. That means borrowers will have to pay more.

On a monthly basis Euribor fell a fraction (-0.1%), from 1.421 at the end of August, to 1.42 at the end of September. That is the first time Euribor has fallen in 5 months, and shows that banks aren’t so sure where interest rates are heading.

Despite the monthly fall, borrowers on annually resetting mortgages will have to start paying more. Repayments on a typical annually resetting mortgage (150,000 Euros, 25 years) will rise by around 10 Euros/month, or 1200 Euros/year.

This is the second time that Euribor has risen on an annualised basis since October 2008, when the credit crunch first griped the markets. Interest rates then tumbled as central banks poured money into the banking system. Rates are now starting to rise as investors fret about a fiscal deficits and inflation.

New mortgage lending

New residential mortgage lending fell 6.8% in July compared to the same month last year, according to the National Institute of Statistics (INE). This is the third month in a row that new mortgage lending has fallen.

New mortgage lending is a key indicator of morale in the housing market. 3 months of declines is not a good sign.

There were 55,570 new mortgages signed in July, a fraction up on the 55,143 signed in June, so the news was better on a monthly basis.

The average residential loan value in July was 122,238 Euros, up 5.9% on last year and 2.3% on June, showing that banks are lending more to fewer people.

Overall new residential mortgage lending was 6.793 billion Euros, down 1,3% on last year.

The average interest rate in July was 3.77%, down 4.1% in a month and 13.5pc over 12 months.

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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com.