Euribor rate October 2007: 4.647%
Euribor – the interest rate most commonly used to calculate mortgage payments in Spain – dropped last month to 4.647%, the first monthly fall since September 2005. This is due to the recent decision of the European Central Bank not to raise interest rates in the aftermath of the summer credit crunch, and will mean slightly lower monthly mortgage payments for borrowers whose mortgages reset in the next few months. Euribor is still 22% higher than it was a year ago, and 121% higher than in June 2004.
Euribor is derived from the Eurozone base rate set by the governing council of the ECB, which meets every month to decide the rate. The ECB was expected to continue raising rates this year, but after the summer credit crunch further increases appear to have been shelved, for now at least. BBVA – one of Spain’s largest banks – believes that the ECB might even lower rates by 25 basis points at the beginning of 2008, which would bring down Euribor, and the monthly payments of borrowers with Spanish mortgages.
Mortgage delinquency rates (or mortgage defaults) rose to 0.53% in the second quarter of the year, according to figures from the Bank of Spain. This shows that an increasing number of borrowers are struggling to pay their mortgages, though default rates are still close to historic lows.
The government’s mortgage reform law looks set to pass shortly, which will make changing your mortgage provider easier, and up to 80% cheaper. Notary fees, registry fees, commissions and cancelation / modification costs will all be reduced for borrowers who take out mortgages after the new law has passed.
© Mark Stucklin (Spanish Property Insight)