Euribor, the rate normally used to set Spanish mortgage interest payments, fell to 0.335% in November, the lowest rate ever, and 34% lower than a year ago, as illustrated by the chart above.
Mortgage repayments will fall a fraction for the typical borrower, in many cases by around €10 per month, or €120 per year. Borrowers unlucky enough to have minimum interest rate clauses in their mortgage contracts will not benefit from the recent falls in Euribor.
The following chart makes clear how low Euribor has fallen over the last decade. With the Eurozone heading for troubled waters it’s highly unlikely there will be any increase in base rates in the next year or so.
But it looks like the recent trend down has bottomed out for now, as illustrated by the next chart. Apart from anything else, it’s hard to see how Euribor could go any lower than it is.
Lower mortgage rates are welcome news for existing borrowers on annually resetting mortgages without minimum interest rate clauses, but not much use for people who can’t get a loan thanks to the ongoing Spanish credit crunch. However, there are potential signs that lending is on an upward trend, as discussed recently in an article on the Key To Recovery: Spanish Mortgage Lending Surges Over Four Months, and illustrated by the next chart. If banks start lending mortgages again that will remove one more obstacle to a sustained recovery in the Spanish property market.
But, despite the recent increase in new mortgage loans signed, the overall value of mortgage lending is still falling, down 8% to €727.4 billion in September 2014, according the Spanish Mortgage Association (AHE).