Spanish Mortgage Rates on the Rise in April

euribor mortgage rates spanish property

Euribor (12 months) ended April on a monthly average of 0.604, up 4.7 per cent on March and 14.4 per cent higher than the same time last year.

That’s the largest annualised increase in Euribor since January 2012, and only the second increase in 27 months. So it looks like the European Central Bank’s interventions to drive down interest rates have largely played out, with interbank base rates at a historical low of just 0.25 per cent.

The ECB has made it clear that interbank base rates will remain low for the foreseeable future, so nobody expects a sudden jump in Euribor. However, some analysts forecast a mild increase in Euribor over the coming months, to around 0.650 by August.

Last month’s increase in Euribor won’t be welcome new to Spain’s stretched borrowers, but it won’t have much of an impact on household budgets, amounting to around two euros a month more on a typical €150,000 mortgage.

Euribor last peaked in July 2008 at 5.393 per cent, so we are still a long way from a situation of normal base rates, let alone high rates. Artificially low base rates have a habit of stoking up housing bubbles, as some argue is happening once again in the UK.

euribor morgtgage rates over a decade for Spanish property

Spanish Mortgage Lending Implosion Continues

It doesn’t seem to matter what happens to the price of money in Spain, mortgage lending carries on imploding. New mortgage lending on residential homes in February fell an annualised 33 per cent to 16,420 in volume terms, and 1.1 per cent by average mortgage value, to €102,443, all according to the latest figures from the National Institute of Statistics.

Strangely, February’s new mortgage lending surged in Madrid and the Basque Country whilst falling everywhere else.

Spanish mortgage lending annualised change by region february 2014

The overall drop in new mortgage lending has a lot to do with the artificial collapse in homes sales at the start of this year, brought about by fiscal distortions, as explained in this article: Fiscal Distortions Behind February Plunge in Home Sales. There will probably be an artificial surge in new mortgage lending in the coming months, as fiscal distortions wear off.

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