A summary of the Latest Euribor and Spanish mortgage news
Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell to 1.45pc in March, leaving it 25pc lower than the same time last year. That’s a big fall.
As a result, repayments on a typical 25-year, €120,000-mortgage resetting now will go down by around €25/month or €300/year.
Mortgage rates are plunging because of the new policy by the European Central Bank (ECB) to provide banks with unlimited funding for 3 years.
The following chart shows Euribor over a decade.
Credit Crunch II
None of this means cheap credit for mortgage borrowers. Quite the opposite: When banks can only get short-term (3-year) financing, they avoid lending to house-buyers for 25 years.
Partly as a consequence, new mortgage lending in Spain has collapsed, down in January an annualised 41pc by volume, and 47pc by value, with the average mortgage value down 10pc, as illustrated in the charts below. It’s clear Spain is back in a credit crunch.
So mortgage rates have plunged, but so has new lending. The result is less money available to buy housing, which means downward pressure on prices (in the average).
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 email@example.com.