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Mortgage rates plunge as lending shrivels up

The latest Spanish mortgage and Euribor news

Euribor (12 months), the interest rate most often used to calculate mortgage repayments in Spain, fell to 0.88pc in August, the lowest level on record, and the first time in the history of the Eurozone iit has ever fallen below 1pc, as illustrated by the chart above.

As a consequence of the latest fall in Euribor, interest payments on a 24-year, €200,000 mortgage could fall by €119/month, or €1,428/year.

New borrowers, however, will not benefit as much, if at all, because banks are dramatically increasing their spreads on new loans.

But new borrowers are the lucky ones, as they managed to get a loan at all. As the ongoing collapse in new lending suggests, most didn’t. New mortgage approvals fell an annualised 25pc in June (monthly -6.5pc), and the average mortgage value fell 2.6pc to €107,507, according to figures from the INE. As far as mortgage lending is concerned, Spain is deep into a double-dip, as illustrated by the graphs below (first comes the volume of new mortgage lending, then the annualised change).

As I always have to point out at this stage, fewer smaller mortgages means downward pressure on house prices. A credit boom drives up house prices, and a credit crunch drives them down.

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