Mortgages are 250 euros more expensive per month after a year of constant rises in Euribor rate

The reference rate for calculating the price of these loans has risen in twelve months from 0.3% to more than 4%

Nuria Triguero

Malaga

Friday, 14 July 2023, 12:37

Homeowners in Spain are forking out an average of 250 euros more on their monthly mortgage payments following 12 months of steady rises in interest rates.

This 21 July will mark a year since the European Central Bank (ECB) started its rise in interest rates, which has helped contain inflation, but resulted in the average mortgage in Spain becoming more expensive by more than 250 euros a month.

For example, a loan of 150,000 euros with a term of 25 years and an interest rate of Euribor plus 1% - in this case, the homeowner has gone from paying 625 euros in June 2022 to 877.50 euros in June 2023.

The rise in the Euribor (in May 2022 it was at 0.287% and this June it had surpassed 4%) affects those already mortgaged who have their loan linked to a variable rate, as well as all new homeowners, both those who take out variable and fixed loans. The situation is different from a year ago: fixed mortgages have become difficult to find, expensive and full of requirements. "The days of 2% mortgages are over. 3.5% or even 4% is the norm now," said HelpMyCash, a portal specialising in comparisons of financial products. "New buyers have to re-evaluate their expectations and consider other alternatives such as mixed mortgages," they added.

Deposits and savings accounts benefit

The increase in interest rates has also had a positive impact on savers. "The measures taken by the body in charge of managing the European Union's monetary policy have led to a notable increase in the profitability of fixed-term deposits. In January last year, the average interest on deposits was 0.04%, according to the Bank of Spain, while last May they reached an average yield of 1.64%", according to HelpMyCash. "This was 22 basis points higher than in April. In addition, it is the highest rate since January 2014, when in that month, the profitability of deposits reached 1.45%," experts said.

The best fixed-term deposits have already surpassed the 4% barrier, something unthinkable a year ago. However, the most profitable options are in the hands of foreign banks that market their savings products in Spain via the internet. "Spanish banks lag behind European deposits, although the most profitable options are between 2% and 3% or even higher," experts said. The latest Spanish bank to announce a rise was Cajamar, which offers 2.78% APR for one year.

To the question about whether high interest rates will remain high for long, the analysts said: "There are enough indices in the economy to suggest that interest rates will remain high and that they could be part of the new normal. The odd thing was that they stayed negative for so many years".

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