climb on climb
Mortgage costs across Spain hinge on Euribor, the benchmark that drives nearly all variable-rate loans. Recent forecasts suggest Euribor could reach new highs in early 2022, signaling a turning point for borrowers. With little data from the final two working days of the month, banks anticipate August average mortgage rates around 4.072%. If this holds, the autumn period could bring a notable rise after months of volatility. A potential increase of around 4.6 points would mark a sharp climb from -0.502% in December 2021 to about 4.149% in July, the steepest surge seen in roughly nineteen months. For floating-rate mortgages, the situation remains especially relevant as lenders prepare for a softer Euribor trend, drawing from prior index movements to gauge the next few months.
Some floating-rate mortgages are reviewed semiannually, but most are revised annually. Monthly payments typically rise whenever Euribor climbs versus the prior year, aligning with the reference month used for loan reviews. The expectation is that quota increases will slow as Euribor stabilizes at higher levels later this year, contrasting with the more volatile first half of 2022. Early in that year Euribor began at -0.477% in January and finished December at 3.018%.
By August of the previous year, the index stood at 1.249%. The year-on-year gap now sits around 2.82 percentage points. To put this in context, year-over-year differences were under one point from January to May 2022, then climbed to three points by last September. In October the gap reached 3.1, and in March it peaked near 3.884, before gradually moderating. Quotas finally dipped below three points per person this August for the first time in eleven months.
budget implications of rising rates
Clearly, quotas will inch higher at a slower pace, yet they are still expected to rise in the near term. Consider a mortgage up to 150,000 euros with a 24-year term, Euribor plus 1% referenced August data (typically reviewed in October). Monthly payments could rise from 674 to 901 euros, or about 227 euros more per month, translating to roughly 2,724 euros more per year. For a 300,000 euro loan with identical terms, payments could go from 1,348 to 1,803 euros — an increase of 455 euros monthly and about 5,460 euros per year.
Those with existing loans will feel the impact more gradually, yet the effect is clear. Two reference loans revised with 2019 data show a painful trend: August 2021 payments of 552 and 1,105 euros per month would rise by 349 and 698 euros, respectively, after two years, marking a 63% higher cost overall.
As a result, roughly five million mortgages tied to housing purchases and about 3.7 million variable-rate loans linked to Euribor face higher costs. Of these, around 35% (approximately 1.295 million) are indexed to Euribor with data from January to June, 25% (about 925,000) from July to September, and slightly under 40% (around 1.48 million) from October. The majority of loans showing more than a three-point rise are aligned to October through December data, with roughly three million households affected by last October to this July’s index updates.
ECB actions and the outlook
Forecasts from major lenders and researchers suggest Euribor has already peaked and will start to ease in the coming months. Some banks project an average of around 4.1% for this year, about 3.7% next year, and near 3.2% in 2025. Specific banks offer differing outlooks: CaixaBank anticipates around 3.86% by December and about 2.8% by late 2024, while Funcas sees a drop from an average of 4.03% in late 2023 to about 3.33% in the October-December window of the next fiscal year.
Assuming a moderation in rate increases, mortgage quotas could stabilize and perhaps even begin to fall in the next couple of years. All of this hinges on the European Central Bank’s moves to curb inflation through policy rate changes. Euribor measures the cost of interbank borrowing; its level a year from now depends on whether the ECB continues tightening or starts easing.
The current environment suggests the rate-hike cycle is nearing its end. Policymakers have signaled openness to pausing further hikes or dialing them back, though inflation pressures and the broader eurozone economy keep the door ajar for additional adjustments. If inflation cools and growth remains fragile, a gentler path could emerge; otherwise, higher rates could persist longer than markets expect. Still, the overarching trend remains clear: Euribor is transitioning from a sharp rise to a more deliberate, slower-moving ascent or potential decline as central banks recalibrate. The market will watch closely for the next steps in policy normalization and their ripple effects on mortgage payments and household budgets.