Euribor for January 2007: 4.498%
Euribor – the interest rate most commonly used to calculate mortgage payments in Spain – fell in January to 4.498% (to be confirmed by the Bank of Spain).
Though just a fall of 29 basis points, it represents a fall of 6% compared to the high of 4.792% in December 2008. This is the largest monthly fall in 4 years.
Euribor rates are falling on expectations that the European Central Bank will lower base rates from the current level of 4%, following the lead of the Feb, which has dropped rates by 75 basis points since the start of the year, with more reductions expected. According to a study by pricewaterhousecoopers, experts expect the ECB to lower rates during the first quarter. Nevertheless, the ECB decided to leave base rates unchanged in February, citing inflation risks.
Euribor may have started falling, but that doesn’t immediate relief for mortgage borrowers. Euribor is still 10.7% higher than it was a year ago, so borrowers with mortgages resetting annually in January will see their monthly repayments go up, not down.
And a falling Euribor will bring little joy to people hoping to take out a mortgage. Spanish lenders have dramatically tightened up lending criteria, and increased their fees, making it now harder and more expensive to get a mortgage than it has been in recent years. This all thanks to the credit crunch.
Demand for Spanish mortgages fell significantly in the last quarter of 2007, and the average Spanish mortgage term is now 28 years, up from 10 years in 1990.
© Mark Stucklin (Spanish Property Insight)