The latest figures for the Euribor, the base rate used to calculate Spanish mortgages was at -0.188 in May 2018, putting it at 48% lower than in May 2017. Although the May rate is slightly higher than that in April, it still represents a saving for those who reset their Spanish mortgages annually and mortgage holders will reduce their monthly payments by approximately €3 on a €120,000 loan with a 20-year term.
According to Mark Stücklin of Spanish Property Insight, who has been tracking Spanish mortgages for many years, it looks like the Euribor’s downward trend is more or less over, which means this is a good time to get a mortgage for a Spanish property.
Two elements are likely to affect the interest rates in the coming months: one is the political upheaval in Italy, with its untried and untested coalition government that is dominated by populist policies and Eurosceptic politicians. This has raised concerns about Italy’s place in the Eurozone, with some fearing that this new government will try to do a ‘Brexit’.
And, in Spain, the PSOE party introduced a successful vote of ‘No Confidence’ against the Spanish prime minister, Mariano Rajoy who was forced out of government by a cross-party vote. With Pedro Sanchez of PSOE now installed as prime minister there are concerns about Spain’s economic stability given that PSOE has no majority in parliament and is dependent on other parties for support.
AHowever, both these countries have large public deficits, which means that the European Central Bank (ECB) is unlikely to raise interest rates any time soon. Furthermore, they still have a long way to rise before they get out of negative territory.
ll this means that Spanish mortgages are still good value and this is an excellent time to take out a long-term, fixed-interest rate mortgage and avail yourself of today’s cheap cost of borrowing. As Stücklin says: “If interest rates, inflation, and Spanish property prices rise (as they are), buying a Spanish home today with a fixed-rate mortgage could turn out to be a good investment.”