This is a website for buyers, owners, and sellers of property in Spain, offering reliable information and resources to help you get things done with confidence. It is run by Mark Stücklin, author of the Spanish Property Doctor Column in The Sunday Times (2005-2008), and the book ‘Need to Know: Buying Property in Spain’ published by Collins.
Euribor for June 2007: 4.506%
Euribor – the interest rate most commonly used to calculate mortgage payments in Spain – rose again last month to 4.506% (to be confirmed by the Bank of Spain). This will push up the cost of financing a Spanish property purchase with a mortgage from a lender in Spain.
There have now been 21 consecutive monthly increases in Euribor, pushing it up to its highest level since May 2000. Euribor is now 32.5% higher than it was a year ago, and 114% higher than in June 2004.
Rising Spanish property prices are forcing Spanish property buyers to take on longer-term mortgages. According to the Spanish Mortgage Association (AHE) the average new mortgage now has a lifetime of 27 years, compared to an average of 25 years.
According to the AHE, the average Spanish variable-rate mortgage of 147.268 Euros over 26 years will now cost 863 Euros per month to repay, compared to 768 Euros per month a year ago. This makes the average Spanish mortgage 95 Euros per month, and 1,140 Euros per year more expensive.
It appears that Spanish mortgage lenders are taking advantage of rising interest rates to increase other mortgage costs, such as opening fees, and other administrative fees. According to the Bank of Spain, administration fees are up by 16% and opening fees by 4.47%. Rising fees are slowing the growth in mortgage lending, which was 21.7% higher in March than a year earlier, the lowest annual increase since 2003.
Mortgage delinquency (default) rates are also on the rise, though still not far off historic lows. Delinquency rates rose to 0.462% in the first quarter of the year, from 0.385% in the same period of 2006. This is the highest level since December 2002, when it reached 0.430%.
But rising interest rates will have no negative impact on the finances of 65% of Spanish households, according to a new report from the international consultancy Deloitte. The report argues that Spanish household wealth has risen dramatically in recent years, in line with rising property prices, so rising interest rates will not have a dramatic effect on household indebtedness, and 65% of Spaniards with mortgages will not have to have to sacrifice “any activity from daily life.”
Base rates
Euribor is derived from the Eurozone base rate set by the governing council of the ECB during monthly meetings presided over by Jean Claude Trichet – President of the ECB. The ECB raised base rates from 3.5% to 3.75% in March, and then by a further quarter point to 4% on 6 June. BBVA – one of Spain’s largest banks – expects base rates to rise to 4.5% by the end of the year, and Spanish property prices to fall in 2008 as a consequence. UK and US interest rates stand at 5.5% and 5.25% respectively, both higher than rates in the Eurozone.
© Mark Stucklin (Spanish Property Insight)
