Euribor (12 months) – the interest rate most commonly used to calculate mortgage payments in Spain – rose to 4.994% in May, the highest level since December 2000.

As the month ended, the daily Euribor rate broke through the 5% barrier, suggesting that Euribor will rise again in June.

Euribor’s all time high of 5.284% in August 2000 looks set to be beaten as lending rates tighten in the wake of the credit crunch.

After the latest rise, monthly payments on an average mortgage of €150,000 at 25 years with a rate of Euribor +0.5% will go up by €54 a month, or nearly €650 a year.

Euribor is rising because of the credit crunch, and because the European Central Bank shows no sign of lowering base rates whilst Eurozone inflation stands at 3.6%, well above the target of below but close to 2%.

The credit crunch is also playing havoc with the Spanish property market, which relies on mortgage lending for liquidity. The National Institute of Statistics has released figures showing that the number of new mortgages sold fell close to 40% in May, whilst the average value of new mortgages also fell by 3.76% to 141,172 Euros.

Despite rising mortgage rates 98% of new mortgages in Spain are variable rate, which makes the Spanish property market highly vulnerable to rising interest rates.