A 1.5 percent rise in Euribor within six months rattled Spain. For a typical 150,000 euro loan over 25 years, monthly payments would grow by 85 euros, or about 1,020 euros per year. That extra cost matters greatly for families in today’s inflationary climate, as purchasing power shrinks and echoes of the 2008 housing crisis resurface.
Economic thinkers weigh in with a cautious stance. One university economist notes that Euribor is unlikely to exceed 1.5% before the middle of 2023, while highlighting that the historical average of this index since 1999 has hovered around 3.39%. The implication is that the current levels are not expected to persist for the rest of the decade.
A mortgage industry professional also offers reassurance: the market has faced higher rates before, and the recent periods of subzero Euribor showed that borrowers with variable loans benefited from reduced installments. Since early 2016, European banks have often moved into negative territory, a dynamic that allowed many borrowers to pay less than the nominal interest on their debt during that stretch.
Euribor and interest rate trends are closely followed by central banks. Data published by the European Central Bank illustrate rates staying negative through much of the 2016–2022 period; the sudden shift into higher inflation prompted policymakers to react. The head of Europe’s central bank has signaled a move toward higher policy rates, with markets already pricing in a continued rise. Banks, in turn, monitor the situation carefully as cheap funding possibilities fade and lending standards tighten.
Almost three out of four mortgages signed in May were at a fixed rate
After a spring of rising Euribor, the rate trajectory began to ease, with rates stabilizing around the 1% mark. In July, the upper bound reached roughly 1.2%, a range that some observers believe will keep the year’s average below 2%. Experts note that this would present an attractive fixed-rate environment for many borrowers.
The shift toward fixed rates is pronounced among new borrowers. While variable-rate loans remain common, a substantial share of lending has moved toward fixed terms since 2022, as buyers seek to shield themselves from future volatility. Those planning to buy emphasize inflation as a major concern, viewing a fixed-rate mortgage as a practical hedge against ongoing price pressures. Despite the broader risk, most families consider the current situation manageable compared with the consequences of a crisis, such as the 2008 housing downturn.
Analysts urge those with variable mortgages to explore switching to a fixed rate when feasible. A rate in the 3–3.5% range on fixed terms is seen as reasonable; rates under 2.5% are considered particularly favorable, and sub-1.5% is viewed by some as almost a gift. Market observers believe the heightened volatility seen over the past decade will eventually ease, reshaping borrowing choices for good.
Increased mortgage cost
The rising cost of mortgages tends to tighten access to housing, especially for households with limited savings. Younger buyers, often with irregular or modest incomes, face the challenge of accumulating enough capital for a down payment and associated buying costs. Typical expectations still require a down payment around 20% of the purchase price plus transfer taxes and notary fees, which translates into substantial upfront savings. For an average 200,000 euro flat, buyers commonly need roughly 45,000 to 50,000 euros in ready capital. Regional experts note that the current climate can limit smaller purchases or purchases farther from city centers.
In response, some regional governments have pursued partnerships with lenders to ease entry for first-time buyers. For instance, a regional plan in Murcia targets young people who demonstrate financial viability by guaranteeing a portion of the purchase price, effectively reducing or removing the need for a large upfront deposit. Collaborations with several banks support this approach. A similar initiative in the Community of Madrid earmarks a substantial fund to help residents under 35 secure homes with a capped loan financing arrangement. The objective remains to extend home ownership opportunities while maintaining prudent lending standards.