This is a website for buyers, owners, and sellers of property in Spain, offering reliable information and resources to help you get things done with confidence. It is run by Mark Stücklin, author of the Spanish Property Doctor Column in The Sunday Times (2005-2008), and the book ‘Need to Know: Buying Property in Spain’ published by Collins.
Mortgage base rates continue dramatic fall
Euribor (12 months), the interest rate most often used to calculate mortgage repayments in Spain, fell to 0.74pc in September, the lowest level on record, and only the second month in its history that it has been below 1pc (the other month was August).
As the chart above makes it clear, Euribor is falling again at rates last seen in the heart of the credit crunch back in 2009. Euribor is now below even the Eurozone base rate, which stands at 0.75pc. That’s rarely happens.
Why is Euribor so low in a financial crisis like this? I confess I’m not sure. I guess because the ECB has slashed interest rates and because banks now assume they will all be bailed out if necessary, so the interbank market is really just borrowing from and lending to the Central Bank, when you boil it down.
As a consequence of the latest fall in Euribor, interest payments on a 20-year, €120,000 mortgage at Euribor +1pc will fall by €80/month, or €960/year. At least hard-pressed Spanish borrowers will be better off for now. Heaven help us when rates start to rise.
New borrowers, however, will not benefit much because banks are dramatically increasing their spreads on new loans. They will just be lucky to get a loan. The next chart shows that the average interest rate charged on new loans in July was 4.24pc, when Euribor was just 1.3pc.
Meanwhile, mortgage lending continues its collapse (outstanding mortgage lending down 8.65pc over 12 months to end July (AHE), new mortgage approvals down 17.5pc (INE)), meaning less money available to buy homes, thus falling prices. The value of the average new mortgage loan fell 10.5pc to €98,892 – the first time it has gone below €100,000 since 2003, as illustrated by the next chart.
Paul Whittaker says:
My mortgage seems to have minimum rate, so I missed out on the full fall in Euribor. Is this common? Not really grumbling because the rate is 3.25%. However, it does seem to be the banks having their cake and eating it once again.
Daniel hermon says:
Well thats good news im currently looking for a mortgage and have gone with sabadell. I have just opened an account with then and got a surveyer out too. Still think spanish mortgage payments are easier then uk just got alot more to set up. Does anyone bank with sabadell?
Lynn says:
I am going to view properties out in Spain next week. Can anyone give me some words of wisdom when considering a mortgage in Spain please?
admin says:
Lynn, the best place to ask this question is in the mortgage forum http://www.spanishpropertyinsight.com/forums/viewforum.php?f=13
Maurice Nichol says:
Hi, try Lloyds (formerly Halifax). I have had good service (for a bank) since buying in Spain 5 years ago
Nick