The average rate for new mortgages has continued to drift upward. It rose from 1.38% at the end of last year to 2.03% in August, based on Bank of Spain data. Average fixed-rate deals for 28 years on mortgage portals now sit between 2% and 4.55%. As the European Central Bank announces higher official rates, questions arise about how these moves will affect mortgages. Idealista reports that a typical fixed 28-year loan of €170,000 increased from €585 per month at the start of the year to €754 today. The ECB’s decision to raise the official money price by 0.75 percentage points could lift monthly payments by roughly €60.
More than 2.5 points increase so far this year
The hike in the official price of money pushes up the interest rates charged on mortgages and consumer loans, a change that impacts household budgets and business financing alike. The one-year Euribor, a key reference for mortgage pricing, began rising in July. This happened even before the ECB’s first official rate increase in 11 years. The trend intensified in spring and picked up after the central bank raised rates in July and September by 0.75 points, taking the policy rate to 1.25%. Euribor climbed from a low of -0.505% in November to levels above 2.2% in September and has recently hovered around 2.7%. These shifts mean higher mortgage payments and more expensive new loans. August’s data show average mortgage rates at 2.03% up from 1.38% at year end, while consumer loan rates rose to 7.09% from 6.1%.
How much do monthly installments increase?
Idealista’s mortgage data indicate that the average Spaniard seeking a home loan in 2022 borrowed about €171,238 to be repaid over 28 years. Earlier this year, the first year payment hovered near 1%, translating to roughly €585 per month. Today, with rates around 3%, monthly payments have risen to about €754. At a 4% interest rate, payments would reach €848. If rates climb to 5%, installments could rise to €948, and at 6% they would top €1,053. These figures illustrate how sensitive long fixed terms are to shifts in the cost of money.
What will happen from now on?
As the ECB continues to adjust policy, borrowing costs are likely to stay higher. The recent rise is a clear signal that financing for homes will be more expensive in the near term, and many households will feel the pinch. With higher rates, fewer families will meet payment obligations, and access to credit for home purchases could tighten. The pace and scope of future increases will shape the affordability landscape for mortgages and consumer credit alike.
The most vulnerable families
If rates keep climbing at a similar pace, a larger share of households may spend more than 40% of their gross income on debt service. Bank of Spain President Pablo Hernández de Cos has warned about this risk in a recent parliamentary appearance. In Spain, lenders and analysts note that about three quarters of new home loans carry fixed rates. That trend helps households manage some risk, but rising rates still threaten affordability for many borrowers.
Digits expelled from the market
Idealista notes that rate increases have started to curb demand in the housing market. Analysis of more than 14,000 mortgage applications from 2022 across multiple institutions shows a growing share of applicants being turned down due to income not meeting risk criteria. With current rates near 3% and potential rises toward 4%, a substantial portion of applicants could lose access to financing. Regional differences persist, with the Balearic Islands showing higher sensitivity to income affordability, followed by Catalonia, where rejection rates rise as rates move from 3% to 4%. The data highlight how higher rates can tighten the pool of eligible buyers even as demand remains robust in certain markets.