The recent rise in the Euribor, the indicator to which most mortgages in Spain are linked, is threatening to hit many property owners quite hard. According to data compiled by CaixaBank Research and taking property prices, gross income and mortgage interest rates into account, Spanish households already spend 33.4% of their income on paying their mortgage and it is estimated that this could increase by 3.2% in just two years, reaching 36.6% by the end of 2023.
The ratio is still way off the 54.6% it reached in the previous financial crisis, but it implies that a notable increase is on the way and could even reach 39.2% if market expectations are fulfilled, as it looks as if they will be from the different interest rates. Specifically, these point to a rise in the 12-month Euribor to 1.06% this year and to 2% at the end of next year.
At present, with the rise in recent weeks, the provisional average for May stands at 0.285%. If it closes at this level, a 150,000 euro mortgage taken out over 20 years with a differential of Euribor + 1%, which is reviewed annually, will see an increase of 50 euros in the monthly payments. In other words, it will cost an extra 600 euros a year.
Nevertheless, experts say there is no call for alarm and the rise will not affect all families all of a sudden, especially because of the recent boom in fixed-interest mortgages; these now account for 73% of new mortgage loans, compared with variable interest rates. This means the expected increase will have a more limited effect on people whose mortgages have been taken out quite recently.