The Euribor continues to climb to increasingly higher levels. The index to which most variable mortgages in Spain are referenced surpassed 3% this Friday, the highest figure in more than two years. For now, it is only a daily figure, but it reflects the upward pressure the indicator has been experiencing in recent weeks. The monthly average for August stands at 2.94% with six business days left to finish the month.
Usually, variable mortgages in Spain review the interest rate paid by the client semiannually or annually. The Euribor is updated daily, but the reference banks use to set that interest rate is the monthly average. Therefore, the Euribor being at 3% does not mean that mortgages will automatically become more expensive. But it does reflect the upward trend due to macroeconomic uncertainty and requires vigilance for further increases in payments, as the cost increase can be substantial. The last time a monthly average was above 3% was in August 2024.
To give an idea in numbers. Usually, variable mortgages review the interest rate every six months or every twelve months. For a household with a typical mortgage of 150,000 euros over 25 years and a differential of one percentage point over the Euribor, they would currently be paying a payment of about 729. If the Euribor closed August at 3%, and the mortgage update is done every six months, the payment would rise to 792, which means 63 euros more per month. In the case of an annual update, they would pay 72 euros more each month.
In any case, it should be noted that the Euribor increase does not affect all mortgage holders equally. Most mortgages signed in Spain are fixed-rate, which allows maintaining the same payment and interest rate regardless of the index’s evolution. And according to the latest INE statistics from May, 61% of mortgages were signed at a fixed rate.
Among those who already have a variable loan, the impact is also not identical. Mortgages usually follow the French amortization system. Each payment includes a portion of interest and another of principal, and the interest is calculated on the outstanding debt. Thus, in the early years of the mortgage, a higher proportion of interest than principal is paid, and in the later years, more principal than interest is repaid. Therefore, the same Euribor increase usually affects a mortgage close to ending less than one with many years ahead. For households in the final years of loan repayment, the increase may be negligible.
Read more The US Drug Enforcement Agency joins the investigation into the death of actress Hayden Panettiere
It is also worth remembering that mortgage conditions are not unchangeable. Any household can switch their variable mortgage to a fixed one, either at their current bank or another offering better conditions. In many cases, this operation is free (although commissions may apply in the early years of the loan) and the client only has to pay for a new property appraisal. In any case, before switching, it is advisable to compare savings by calculating all expenses. This is a particularly interesting option when interest rates are low, as it allows locking in a stable interest rate before increases that raise the payment occur.
The Euribor’s turn began in March, after the outbreak of the war in the Middle East and the sharp rise in energy costs. In January, this mortgage index closed at 2.245%. In March, when the war broke out, it climbed to 2.565% and in May to 2.804%. Energy is one of the fundamental elements of the increases. When oil and gas become more expensive, transportation and production costs rise, and there is a risk that the increase will be passed on to other products. In this scenario, central banks may keep interest rates high or even raise them to prevent inflation from becoming entrenched. In fact, the ECB raised interest rates in June to 2.25%. The Euribor’s climb to 3% reflects that uncertainty that remains in the market.
In any case, the Spanish mortgage market is the third cheapest in the Eurozone. According to the latest data from the European Central Bank, corresponding to June, mortgages in Spain were signed at an average rate of 2.89%, only surpassed by those in Malta (1.95%) and Bulgaria (2.41%). In any case, they are cheaper than the European average of 3.48%, and much more competitive than in other comparable countries such as France (3.16%), Italy (3.49%), or Germany (3.95%).
Read more Russia raises tension with Japan by confirming missile tests in the Kuril Islands