Euribor (12 months) – the interest rate most commonly used to calculate mortgage payments in Spain – rose again in April to 4,82%, up from 4.59% in March, and is now at its highest level since December 2000.
Spanish Mortgage borrowers on annually-resetting variable-rate mortgages will see their mortgage payments go up, as Euribor is now 13.4% higher than it was a year ago.
Repayments on a typical 150,000 Euro mortgage with a 25 year term will rise by around 50 Euros a month, which adds up to 600 Euros a year.
Euribor is derived from European Central Bank (ECB) base rates, which were left unchanged at 4% in April.
The ECB has made clear that controlling inflation remains its primary concern, warning that base rates may even have to rise to choke off inflation in the Euro zone. The ECB’s reiteration of its hawkish stance in April helps explain why Euribor has continued to rise in April, after 2 months of declines at the beginning of the year. Euro Zone inflation was 3.3% in April, well above its target rate of below but close to 2%. Inflation in Spain rose to 4.5% in March.
All of this means that falling mortgage rates are unlikely to ride to the rescue of the Spanish property market. If anything, thanks to the credit crunch, mortgage rates in Spain are set to continue rising, putting further pressure on household budgets, and reducing demand for Spanish property.
