The mortgage market is paying close attention to the EURIBOR’s development as the interest rate reference indicator for the majority of mortgages taken out in Spain. The gradual increase of the indicator in the last year is a turning point for conditions under which mortgages are taken out in Spain.
With that in mind, ‘bad news’ again during July for those who have a mortgage as it closed at an average above 1%. Strong daily rises and falls characterised the 7th month of the year pending the amount the European Central Bank would increase rates. Finally, the ECB opted for a 50 basis point rise.
To all intents and purposes, a 25 year, €180,000 mortgage at an 1% rate and biannual review will stop paying €640 a month and start paying €766 instead. This means €126 more each month, or more than €1,500 a year. Mortgages reviewed in August will be worse off still, as the average monthly rate will probably end up over 1.2%.
It seems clear the ECB will increase interest rates another 50 basis points in the next meeting 8th September as part of the currency policies initiated by the international body to correct the economy’s inflationary trend. Thus, the EURIBOR will continue on an upward trend although not as noticeable as the one experienced in the past weeks.
The Organisation of Consumers and Users (OCU) warned in their report regarding the types of mortgages that buyers should consider extra savings are needed in the event of taking out a variable-rate mortgage in case instalments rise because of EURIBOR, therefore avoiding any payment issues.