Euribor emerged as the star of the 2023 mortgage story, driving sharper payments for variable-rate loans before the year closed on a note of stabilization. Simone Colombelli, Mortgage Director at iAhorro, noted that the second half of 2022 was a brutal stretch for borrowers with adjustable rates, and the fear was that 2023 might not bring relief. Instead, there were signs of resilience as the market found a steadier rhythm.
The principal force keeping the mortgage market from tipping into a sustained decline was Euribor, the main benchmark for European variable-rate mortgages. The year began with Euribor at 3.337%, up from 3.018% at the end of 2022. From there, the month-to-month increases slowed, and a calmer phase set in.
The first dip occurred in August, with Euribor closing at 4.073%, down from 4.149% in July. Yet the European Central Bank continued tightening, and that dip proved short-lived: the index retraced its losses after September, rising again to 4.149%. October brought another rise to 4.160%, the highest level in nearly 15 years since November 2008.
Then came a turn nobody predicted. Although a ceiling around 4.160% seemed plausible, November brought a decline that sparked renewed optimism for December. Euribor fell below 4.160% and drifted toward the 3.7% mark in 2023 after its largest month-to-month drop since February 2009. With only a few days to collect data, December’s average was shaping up as a continuation of that trend.
Looking ahead to 2024, Colombelli offers three scenarios: a hopeful, a moderate, and a cautious outlook. In the optimistic view, Euribor could hover near 3.2% in spring and finish the year around 2.5%. In a more conservative path, the rate might stay near 3.5% in early spring, ease toward 3.3% by summer, and end the year near 2.7%, a touch below current levels. In a pessimistic frame, declines would be slower, with rates not dipping to 3% until late in the year.
What will be the best mortgage in 2024?
The rise in interest rates and Euribor pushed banks to adjust pricing, and the market increasingly favored hybrid mortgages over fixed or variable options. In 2024, many borrowers and lenders gravitated toward hybrids. For example, in February, a large share of new iAhorro borrowers chose hybrid mortgages, with a smaller portion opting for fixed or variable products. The hybrid category gained momentum through the year, accounting for the majority of signatures in November as well.
This shift is striking when recalling a time when fixed-rate mortgages reigned supreme. The surge in Euribor has made variable loans pricier, and fixed-rate products followed suit with higher starting rates. As a result, banks leaned into hybrids, a product line that clients increasingly demand.
A hybrid mortgage blends a fixed initial period, typically three to fifteen years depending on the lender, with a subsequent variable phase until the loan’s end. A mortgage advisor explains that hybrids offer protection against rising Euribor during the fixed period while maintaining the potential for lower costs later if rates ease. Today, many hybrids are priced with a fixed portion below 2.5% and a second period with competitive spreads depending on borrower profiles.
So, what might the coming months reveal? The mortgage director at iAhorro suggests the main upside of lower Euribor could be a revival for fixed-rate loans. With the recent rate increases, homeowners have grown wary of variable products, yet fixed mortgages remained a large portion of the market. A sustained decline in Euribor could encourage more borrowers to lock in fixed rates, especially if institutions signal a stable path forward.
Ultimately, the outlook hints at a potential rebalancing. If Euribor settles into a more predictable corridor, fixed-rate offerings may regain appeal, while hybrids continue to attract those seeking balance between payment certainty and potential rate relief in the long run. A long-term shift toward fixed-rate dominance would resemble a European pattern where many loans are managed with fixed terms, tempered by the flexibility of later adjustments.
Housing prices trend without a broad pullback
Beyond Euribor and interest movements, housing prices continued on an upward course, defying many forecasts. The resilience was strongest in major cities where demand outpaced supply, and the lack of affordable housing kept prices elevated. A representative from the mortgage comparator noted that the trend persisted, particularly in markets with tight inventories.
In places like Madrid, Barcelona, Bilbao, and parts of the Balearic Islands, prices remained notably high. National statistics show the Balearic Islands posting some of the highest averages per square meter, followed by Madrid, the Basque Country, and Catalonia, with the Canary Islands also remaining near the top. These figures reflect regional dynamics where demand remains robust and supply struggles to catch up.
Compared with a year earlier, many price levels held steady or edged higher. For example, the Balearic Islands reported a slight increase in average price per square meter from August 2022 to the present, and similar patterns appeared in Madrid, the Basque Country, and Catalonia, with modest reductions in some areas where demand cooled.
Colombelli observed that the strongest declines tended to occur in areas with weaker demand and a glut of older properties needing renovation. Renovation costs and price concessions combined to shape a more favorable selling environment in those markets. Regions such as Asturias, Castilla y León, and Castilla-La Mancha showed softer price movements, reflecting localized supply-demand imbalances rather than a broad market downturn.
Overall, the housing picture remained resilient in most of the country, underscoring the complexity of the market where macro movements like Euribor interact with local supply dynamics to shape prices.