Mark Stücklin
Spain enjoys some of the cheapest mortgage rates in the world — but that doesn’t mean Spanish homeowners have it easy when it comes to affordability.
Spain stands out internationally for its remarkably low fixed mortgage rates. With long-term loans available at around 2.5–2.8%, Spanish borrowers enjoy some of the cheapest financing in the world. That’s roughly half the rate paid by homeowners in the UK, US, or Australia, where long-term borrowing still costs around 5–6%.
This insight comes from Mapping the World’s Prices 2025, Deutsche Bank’s latest comparison of global city living costs. Low mortgage rates have been a defining feature of the Spanish housing market for years, fuelled by the eurozone’s interest rate environment and strong competition among banks. After a surge in fixed-rate lending during the late 2010s and early 2020s, most mortgage holders in Spain are now locked into stable, low-cost loans.
Low rates, average affordability
But cheap money doesn’t automatically make housing affordable. When mortgage payments are measured as a share of household income, Spanish cities land firmly in the middle of the global pack.
In both Madrid and Barcelona, typical repayments eat up around 35–40% of net household income — a similar burden to cities like Paris or Milan, and significantly more than in Zurich or Frankfurt, where higher salaries make housing more affordable relative to earnings.
In other words, Spain’s low interest rates help buyers borrow more, but not necessarily feel better off.
A market shaped by income, not interest
This highlights a deeper structural issue: Spain doesn’t have a borrowing cost problem — it has an income problem. Even with some of the cheapest mortgages in the world, affordability remains a challenge because wages haven’t kept pace with rising property prices.
It’s a pattern seen in many countries. Low rates fuel demand and inflate prices given supply constraints (created by politicians), which eventually erodes the affordability advantage those low rates once offered.
Spain’s mortgages may be among the cheapest in the world, but housing still isn’t affordable for many. The headline rate might look attractive, but when you compare earnings to monthly payments, Spain ends up mid-table.
