Good News for Mortgages in Spain: Euribor Falls Sharply

Discover the significant drop in Euribor rates, marking the largest monthly fall in 11 years, and its positive impact on Spanish mortgages.

Variable rate mortgage holders in Spain are poised for significant savings as the Euribor rate concluded July at its lowest point in 18 months. This benchmark, which serves as a key indicator for mortgage rates, averaged 3.526% in July—marking the most substantial year-on-year decline since June 2013. In contrast, the previous month’s average stood at 3.65%.

This reduction translates to an anticipated decrease in variable rate mortgage payments by approximately €777 annually, based on a typical mortgage of €140,451 amortized over 23 years, as per data from the National Institute of Statistics. To put it in simpler terms, that’s a monthly saving of about €64.80 for those fortunate enough to ride this wave of financial relief.

Looking back to July 2023, the average Euribor rate was a heftier 4.149%, and this stark contrast is certainly music to the ears of mortgage holders. Analysts are optimistic, predicting that this trend of favorable news is likely to persist. The Euribor's descent follows the European Central Bank's decision to cut interest rates by 0.25% in June, with further reductions on the horizon this autumn, contingent upon the bank's satisfaction with inflation control.

The implications of a lower Euribor rate are manifold; it not only frees up more disposable income for mortgage holders—allowing for increased spending, saving, or investing—but it also has the potential to invigorate the economy. Moreover, it may entice first-time buyers into the property market, although this influx could inadvertently sustain the upward trajectory of property prices.

New buyers face a pivotal decision amidst the current trends: should they opt for a fixed or variable mortgage? As of May, 44.6% of home mortgages were issued at a variable rate, while 55.4% were fixed, with an average interest rate of 3.25%. The choice may hinge on individual risk tolerance and market predictions, but one thing is clear: the landscape of mortgage financing in Spain is evolving, and it’s certainly worth keeping an eye on.