Euribor for February 2007: 4.349%
Euribor – the interest rate most commonly used to calculate mortgage payments in Spain – fell for the second consecutive month in February to 4.349% (to be confirmed by the Bank of Spain).
Even though Euribor fell in February, borrowers on annually-resetting variable rate mortgages will find their monthly mortgage payments rise, because Euribor is still 6.2% higher than it was 12 months ago (down from 22% higher in December 2007).
Monthly mortgage repayments on a typical 149,000 Euros loan with a 26 year term and a rate of Euribor +0.5% will rise from 819 Euros to 841 Euros per month, a monthly increase of 22 Euros, and a yearly increase of 264 Euros. So falling interest rates are not yet translating into falling mortgage repayments for borrowers on annual resets, as Euribor is still higher than it was a year ago.
Borrowers with 6-monthly resets, however, will now pay 28 Euros per month less, a saving of around 334 Euros per year.
Euribor is derived from the ECB base rates, which were left unchanged at 4% in February. The ECB remain hawkish on inflation concerns, and has not followed the Fed or the Bank of England in cutting rates since the subprime mortgage and credit crunch problems emerged. Most analysts expect the ECB to start lowering base rates this year, which explain the recent fall in Euribor.
Having said that, cheaper mortgage rates are not translating into easier access to credit for many potential borrowers. In the light of the credit crunch Spanish banks are now much more wary about lending, and far fewer mortgage applications are approved.
© Mark Stucklin (Spanish Property Insight)