Why did the European Central Bank raise rates recently? The Euribor climbed above 4 percent, hitting 4.007 percent—the highest level since November 2008. This move spotlights the shifting landscape for borrowers across Europe and beyond.
The ECB is scheduled to meet again on July 27. What might unfold? Simone Colombelli, mortgage manager at iAhorro, outlines a likely path: a 25 basis point increase to push rates to 4.25 percent, with the prospect of stability thereafter. This is summarized as, potentially, the last tightening before a pause until September.
Given this trajectory, it seems unlikely that Euribor will hit 5 percent in the near term. Colombelli notes that we could be approaching the Euribor ceiling, with a few months possibly bringing reductions in this indicator.
Against this backdrop, the question for many is whether a variable-rate mortgage remains a wise choice. The answer hinges on individual goals. It is often a strong option for investors, particularly when lenders offer small differentials—sometimes as low as 0.1 to 0.2 percentage points—compared with fixed-rate products.
Among notable variable mortgage offerings is EVO. Euribor-linked loans may carry an APR around 0.48 percent over the base Euribor, with a rate near 2.20 percent for the first two years. Access to these products often requires some payroll arrangements, such as direct deposits of a minimum monthly amount, plus home insurance.
Another widely discussed option comes from Ibercaja, presenting a variable mortgage with Euribor plus 0.60 percent, and a first-year rate around 1.50 percent, with an APR near 5.11 percent. Eligibility typically includes payroll deposits, regular income receipts, use of a company credit card, and two insurance policies, along with routine investments in a mutual fund.
BBVA also features a floating mortgage with Euribor plus 0.60 percent, a first-year rate near 1.49 percent, and an APR around 5.16 percent. The arrangement usually requires payroll direct deposits and two insurances covering home and loan amortization.
Banco Mediolanum’s Freedom Mortgage is another option to consider, offering Euribor at plus 0.79 percent, with 0.99 percent in the first year and an APR of about 3.60 percent. Signing these terms commonly involves opening a bank account with the lender, sustaining residence income at or above a threshold, and choosing life insurance.
Less interest, more connections
Some lenders advertise even lower rates by requiring a higher number of ongoing connections or relationships. These offers can compensate with favorable base rates, yet they demand more commitment from the borrower.
Kutxabank serves as an example where a borrower might enjoy Euribor plus 0.49 percent, with a first-year rate near 2.70 percent and an APR around 4.63 percent, provided that payroll is directly deposited at adequate levels, annual contributions to pension plans reach specified amounts, and home insurance is secured.
Unicaja lies in a similar category, offering Euribor plus 0.50 percent, with a first-year rate near 1.49 percent and an APR around 4.88 percent. Eligibility typically includes a monthly income above a threshold, payroll domiciliation, and a package of insurances along with retirement plan or mutual fund contributions.
Ultimately, the choice comes down to balancing rates with the required commitments. There is no one-size-fits-all mortgage solution; each borrower must weigh personal needs, income stability, and insurance considerations before deciding which product to pursue. The decision is not solely about the rate in isolation, but about how the lender’s requirements align with the borrower’s financial situation and long-term plans. [Citation: European Central Bank rate decisions and lender disclosures].