The Euribor base rate in the Eurozone plunged 13 per cent between May and June after the European Central Bank lowered the cost of borrowing money to an all time low. But mortgage rates are still a fraction higher than they were a year ago.
12-month Euribor, the rate normally used to determine mortgage repayments in Spain, fell from 0.592 in May to 0.513 in June, a percentage change of -13.3 per cent. In June last year the rate was 0.507, so base rates are still 1.2 per cent higher than a year ago, meaning that borrowers on annually resetting mortgages will see their monthly payment rise by a Euro or two.
For example, a borrower with 200,000 Euro loan with a 24-year term will see payments go up by 1 Euro per month, or around 12 Euro per year.
The European Central Bank lowered the Eurozone cost of money at the start of June by 15 basis points, from 0.25 per cent to 0.15 per cent, an all-time low in an attempt to head off deflation.
The impact of this monetary stimulus has been to lower mortgage base rates a fraction, and weaken the Euro against other currencies like the Dollar and the Pound. As a result Spanish property gets cheaper for British buyers with every passing day.
New Residential Mortgage Lending Contracts
Despite the falling cost of interbank lending in the Eurozone, the results of cheaper money are still not being shared around. Indeed, new residential mortgage lending fell an annualised 13.4 per cent in April, according to the latest data from the National Institute of Statistics, and by 7.8 per cent compared to March. The average new mortgage loan rose in value, however, by 6.2 per cent to €100,394.
It is safe to say there will be no recovery in the wider Spanish property market until mortgage lending establishes a solid recovery. In the meantime the market will be lead by cash buyers, foreign investors, and Spaniards buying bank properties as the only way to get financing.