Spanish banks are bracing for 2026 with a notable shift in mortgage strategies, as rising interest rates and strong demand for housing are driving mortgage prices higher and tightening approval conditions for borrowers.
A Boom in Mortgages Despite Tighter Conditions
After years of fierce competition among banks, with many offering attractively low mortgage rates to win over customers, the landscape is changing. As 2025 draws to a close, Spain is on track to sign almost half a million new mortgages—an unprecedented figure not seen since the years following the real estate bubble’s burst. While the number of transactions may not fully match historic highs, the total value of these loans is set to surpass €80 billion, marking the highest volume of mortgage lending since 2008.
Why Are Mortgage Rates Going Up?
A key driver behind pricier mortgages is the Euribor, the benchmark index used for millions of home loans in Spain. The Euribor has been climbing for several months and now sits above 2%. Although changes in the Euribor affect new mortgages with a slight lag, the upward trend signals that borrowers can expect higher rates in the near future.
Adding to the uncertainty is the unpredictability of European Central Bank (ECB) policy. While 2024 saw several rate cuts, analysts warn that rate hikes could return as soon as 2026. Sensing this shift, major Spanish banks have already moved to raise mortgage rates, focusing especially on fixed-rate options, which have become the most popular choice for new buyers in recent years.
A Mixed Approach Among Banks
While big banks are tightening lending conditions and raising rates, some smaller banks are seizing the opportunity to lure customers with competitive offers. However, the broader trend across Spain’s banking sector is clear: stricter approval processes and more expensive mortgages are becoming the new normal.
Real Estate Demand Fuels Risk and Rate Increases
High demand for homes is also shaping banks’ strategies. Concerned about being priced out of the market, many Spanish families are opting for higher mortgages, resulting in increased risk for banks. This added risk, coupled with broader economic uncertainties, justifies the more demanding terms and higher interest rates now being rolled out.
Looking Ahead
With strong demand in the real estate sector, rising rates, and increased scrutiny in mortgage approvals, experts believe the landscape will continue to evolve into 2026. Potential homebuyers are encouraged to carefully review loan terms and stay informed about changing market conditions before making major financial commitments.
Stay tuned for more updates on Spain’s evolving banking and real estate trends.
