Mortgage Base Rates Fall To New Historic Low

euribor spanish property mortgage april 2015

Euribor fell to yet another record low of 0.18% in April, a decline of 15 per cent in a month, and 70 per cent in a year, reducing monthly mortgage payments for borrowers in Spain, whilst new mortgage lending rose 29 per cent in February.

The annualised decline in Euribor (12 months) was the biggest since December 2012, and can be attributed to the blast of “quantitative easing” unleashed by the European Central Bank (ECB), pumping €60 billion a month into the Eurozone monetary system.

Euribor is the base rate used to calculate mortgage repayments for most borrowers in Spain. Its latest fall will reduce costs on a mortgage of €100,000 with a term of 25 years by €220 per year, or €18 per month.

Historically low base rates are prompting talk of a mortgage time bomb in the Spanish property market.

euribor-decade-april-2015

MORTGAGE APPROVALS SURGE IN FEBRUARY

In February 2015, the number of new loans for property went up by 29.2 per cent (21,298 transactions) compared to the same month in 2014, according to the latest data from the National Statistics Institute (INE in Spanish), based on title deeds signed in previous months.

This double-digit increase is the ninth in a row registered in the mortgage market (28.8 per cent in July, 24 per cent in August, 29 per cent in September, 18 per cent in October, 14 per cent in November, 28.9 per cent in December and 20 per cent in January).

This new cycle shows banks ready to lend again, and an increase in demand.

The average amount for a mortgage loan in February 2015 reached €109,486, 37.1 per cent more than the same month in 2014. Capital loaned went up by 37.1 per cent year-on-year and exceeded €2,331 million.

By region, the highest number of mortgages registered in February were Madrid (4,066), Andalusia (4,032) and Catalonia (3,214). The regions that experienced the highest year-on-year variation in new mortgages were Aragon (up 89.5 per cent), the Basque Country (up 59.5 per cent) and Andalusia (up 42.9 per cent).

In terms of mortgage amounts, the regions in which most capital was lent for mortgages were Madrid (€606.7 million), Catalonia (€405.1 million) and Andalusia (€376.8 million).

The average interest rate for mortgages reached 3.35 per cent in February, against the 4.11 per cent registered in February the previous year. 94 per cent of mortgages approved last February used a variable interest rate against 6 per cent with a fixed rate. The Euribor is the reference used in most variable-rate mortgages, featuring in 89.9 per cent of new contracts.

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