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SPANISH MORTGAGE MARKET IN Q1 2021: Stronger than expected recovery

spanish mortgage market euribor q1 2021

A summary of the Spanish mortgage market data released in the first quarter of 2021 – interest rates, mortgage values, and new mortgage lending volumes in Spain – to give you an idea of what’s going on in the mortgage market, which plays a big role in the housing market.

Euribor / base rates for Spanish mortgages

12-month Euribor, the base rate used to calculate interest payments on most mortgages in Spain, ended the quarter at -0.486 as a monthly average (chart above), compared to -0.266 the same month a year before, meaning a negative rate 83% larger than it was 12 months before.

As a result, borrowers in Spain with annually resetting Spanish mortgages based on Euribor would have seen their monthly repayments fall by around €11 per month for a typical €120,000 loan with a 20 year term.

As you can see from the chart above, euribor was climbing towards positive territory in the first half of last year, before plunging down to record lows in January of this year, and then bottoming out. The obvious explanation for this is the coronavirus pandemic, and the response of central banks.

Looking at the evolution of euribor over the last decade in the next chart, you can clearly see how the economic crisis after the financial crash pushed rates down over years into negative territory, and then the pandemic pushed them down again just as they looked like recovering.

spanish mortgage market euribor 10 years q1 2021

All good news for borrowers, especially those who have not suffered financially as a result of Covid-19. 

Spanish mortgage lending in Q1 2021

According to figures from the Association of Spanish Notaries, there were 71,275 new residential mortgage loans signed in the quarter, up 18.7% compared to the same period last year, when mortgage lending was suppressed by the beginning of the pandemic and lockdown. Expect the annualised increase to be even greater in Q2.

spanish mortgage market q1 2021
spanish mortgage market q1 2021

The average new mortgage loan value was €140,856, down 1.9% compared to the same period last year.

spanish mortgage market q1 2021

Rather like the housing market, the overall picture from the mortgage market is one of a stronger than expected recovery as we emerge from the pandemic, and excellent conditions for solvent borrowers. Reviewing Q3 last year I was pessimistic about the outlook, which has turned out better than I expected in the short term. But given the massive amounts of public debt that is partly underwriting this recovery, it’s still way too early to assume that an economic crisis has been avoided. It’s early days yet.

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