Mortgage payments in Malaga province to rise by 100 euros per month on average and nearly 1,300 per year

The index averaged 2.95% in August, up from 2.85% in July and 2.80% in May and June. Compared with a year ago, when it stood at 2.11%, the increase could add around 100 euros a month to repayments on a typical Malaga mortgage or almost 1,300 euros over the course of a year.

The Euribor, which underpins the interest rates on most mortgages in Spain, changes every day in response to economic indicators such as economic growth, employment and, above all, inflation. Prices have accelerated in recent months: Spain's latest preliminary CPI figure, for August, showed annual inflation running at 4.3%.

Inflation has also picked up in the eurozone and the US, raising expectations that central banks could increase official interest rates at their next meetings.

The average mortgage taken out in Malaga 12 months ago amounted to 248,539 euros, according to figures from the INE national institute of statistics. Assuming a 25-year repayment term and an interest rate set at Euribor plus a 1% margin, the monthly repayment started at 1,192.87 euros.

With the Euribor now at 2.95%, calculations using the Bank of Spain's mortgage simulator put the new monthly payment above 1,300 euros. That represents an average increase of 108 euros a month, or almost 1,300 euros over a year.

The average mortgage in Malaga ranks among the most expensive in Spain. It regularly comes third in the national rankings, just behind the Balearic Islands and Madrid and ahead of Barcelona. Mortgages in Spain as a whole are smaller, meaning borrowers face a less costly adjustment.

A year ago, the average Spanish mortgage stood at less than 170,000 euros. For these borrowers, the latest rate revision will add around 74 euros to the monthly payment, taking it from 814 euros to roughly 888 euros and adding 888 euros to the annual cost.

Although less common, some mortgages undergo reviews every six months. So what will happen to these borrowers?

The average mortgage taken out in Malaga province in February already approached 260,000 euros, when the Euribor stood at 2.22%. With a 1% margin and a 25-year repayment term, the monthly payment, which initially stood at 1,262 euros, would now rise to 1,362 euros. That means an increase of 100 euros a month, or 600 euros over the next six months.

In Spain as a whole, the average mortgage taken out in February amounted to just over 173,000 euros. Its monthly payment would rise from 841.68 euros to around 910 euros, an increase of 67 euros a month and more than 400 euros over the next six months.

Will the Euribor continue to rise and should mortgage holders expect further increases of this scale?

Roams finance expert Pablo Vega explained the current situation: "We have a particularly striking situation: since June, the European Central Bank has made only one 25-basis-point increase in interest rates, yet the Euribor has continued to climb and has already exceeded 3% during intraday trading. This shows that financial costs depend not only on where official interest rates stand today, but also on where the market expects them to be in six or 12 months."

The market will be watching the ECB's next meeting, scheduled for 10 September. Vega said investors would be looking beyond whether the central bank raises rates at that meeting and instead focus on whether further moves could follow.

"That will probably be the real catalyst for determining whether 3% becomes a consolidation level or the starting point for another upward move," Vega concluded.

Miquel Riera, an analyst at HelpMyCash, said the Euribor could end the year at around 2.80% in an optimistic scenario, as current market pricing reflects two European Central Bank rate rises even though there may only be one.

However, if prices continue to rise, driven by the conflict between the US and Iran, the index could reach 3.10% by December.

In any case, Riera expects the Euribor to end the year above its level at the end of 2025. He therefore advises variable-rate mortgage holders to assess whether they can afford their repayments if the index reaches 3% or higher.

"If your finances do not allow it, it is important to speak to your bank and look for solutions, such as switching to a fixed rate or reducing your monthly payment by extending the mortgage term," he said.

The Euribor already stands at its highest level since August 2024. After reaching a peak of around 4.4% in June 2023 during the inflation crisis, it fell to just above 2% a year ago before starting to climb again, as the accompanying chart shows.

Higher interest rates are also affecting the mortgage market.

The latest report from Idealista shows that mixed-rate mortgages, which combine a fixed interest rate for the first few years with a variable rate for the remainder of the repayment period, accounted for 15% of the mortgages it brokered in July.

Take-up of these mortgages has tripled since the beginning of the year and reached its highest level in the past ten months.

According to the property website, the popularity of mixed-rate mortgages tends to move in line with the interest-rate cycle: when the Euribor rises, so does the share of mixed-rate mortgages.

"The historical average for the Euribor is around 1.92%, well below the current 2.95%, so it is reasonable for many households to bet on the increase being temporary and the rate falling again before the fixed-rate period of a mixed mortgage expires, usually after three to five years," Idealista economist Roberto Andecochea stated.

By contrast, he said fixed-rate mortgages are becoming less competitive.

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