Another month, another fall in Eurozone base rates, reducing borrowing costs in Spain.
12-month Euribor – the rate used to calculate most mortgage repayments in Spain – fell to yet another historic low of 0.079 in November, a percentage decline of 38% in a month, and 76% in a year, reducing monthly mortgage repayments for many borrowers in Spain.
A typical borrower with an annually resetting 20-year mortgage of €120,000 will see mortgage payments fall by €13.45 per month, adding up to a saving of €161 per year.
Euribor has been below 1% since June 2012, but Euro interest rates were not always so low. Back in July 2008 they peaked at 5.393%, and in the decades before Spain joined the Euro, interest rates above 10% were common.
Eurozone interest rates are being driven down by the quantitative easing programme of the ECB, which is buying around €60 billion a month of public and private debt to try and stimulate the economy and inflation. The market expects this programme to continue, or even increase, setting the scene for even lower rates in future.
With interest rates so low, some incredible fixed-rate deals are available below 3%, but Spanish borrowers largely ignore the lower risk of fixed rate deals for the cheaper repayments of variable rates in the short term. This fact could come back to haunt the Spanish housing market when interest rates start to rise, as they eventually must.