Spanish mortgage market still broken

Euribor Spanish mortgage

All the latest Euribor and Spanish mortgage news from July 2013

Euribor (12 month) rose a fraction last month, from 0.507pc in June to 0.525pc in July, up 3.6pc in a month, but down 50.5pc in 12 months.

spanish mortgage euribor rateThis small monthly increase makes little difference – Euribor is still abnormally low thanks to the intervention of the ECB, and close to its all-time low of 0.484pc in May.

As a result of the 12-month decline, a typical 20-year / €120,000 mortgage will see monthly payments fall by around €30, or €360 per year.

Euribor is expected to stay low for the foreseeable future, but it won’t stay this low for ever. Rates will have to rise to a more normal level at some point, at which point borrowers will start to feel the pain.

Spanish mortgage euribor rate

Spanish mortgage euribor rate
Another plunge in new mortgage lending

In the meantime, new borrowers are lucky to get a mortgage at all, and the spread that lenders charge (above Euribor) is rising.

There were just 18,420 new mortgage approvals in May, down 29pc in a year, according to the latest data from the INE. The average new mortgage loan fell 5.4pc to €96,000. and the average interest rate was 4.58pc, the highest level in a year.

So banks are still tightening the mortgage credit taps, lending fewer, smaller mortgages with higher spreads, making mortgage borrowing more expensive for the few that can get it.

To all intents and purposes, Spanish banks will only lend you a mortgage if you take a repossessed home off their hands. This is distorting the market, and creating opportunities for canny investors.

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