Euribor, the interest rate most commonly used to calculate mortgage payments in Spain, has hit an all time daily high of 5.418% following hints by Jean Claude Trichet, president of the European Central Bank, that base rates might go up next month.
Today’s jump in Euribor, from 5.125% at the start of trading, smashed the previous high of 5.341% reached in August 2000.
Euribor moves on a daily basis, reflecting changing sentiments in the interbank lending market, but for calculating mortgage repayments in Spain a monthly average is used. The month-to-date Euribor average is now 5.168%, which will drive up repayments for a typical 150,000 Euro, 25-year mortgage by around 700 Euros a year.
Higher borrowing costs raises the cost of housing, which reduces demand. The relentless rise in Euribor is sure to pile further pressure on a Spanish property market already reeling from a monumental oversupply of property brought about by an insane speculative boom.