To make ends meet each month, households face a steady stream of obstacles. The rising cost of living is visible in grocery stores, fuel stations, and even subscription services. Yet the mortgage market presents an even tougher challenge. The Euribor, the benchmark for most variable-rate loans, rose from an average of -0.477% in January to 1.249% by the end of August. The climb shows no sign of easing, and while September’s average edges closer to 1.9%, this marks the most expensive period in a decade. Fixed-rate mortgages are not affected, but borrowers with variable rates must factor in this shift. At present, monthly payments have increased by about 122 euros, equating to roughly 1,500 euros more per year. So, how can families cope with the ascent? And how long will it last?
If the current trend continues, CaixaBank Research reports that in 2023 mortgage payments could account for four tenths of a family’s earnings. That is a heavier burden than in 2021, when the share was below 34% of total income. “Many families are already hitting a wall on the ascent. If Euribor ends at 2%, the monthly payment could rise by €200”, notes Ricard Garriga, CEO of Trioteca. On the downside, the Euribor rise could lock out more economically vulnerable buyers as well. Juan Villén, Idealista’s mortgage manager, explains that about 7 percent of applicants may exit the market.
inflation slopes
The growth pace of Euribor is so rapid that forecasts are pulled further ahead with each passing week. “With Euribor, time will tell, since everything hinges on inflation trends”, explains Miquel Riera, mortgage manager at HelpMycash. The struggle to control prices is pushing central banks to raise rates quickly, a development that directly affects mortgage costs.
Last Thursday the European Central Bank raised its key rate to 1.25% amid elevated inflation expectations, and further hikes are anticipated. If monetary policy succeeds, Euribor could stabilize. If not, the risk is a slower economy and higher default risk. Predicting the future remains difficult, but most experts expect Euribor to stay high into 2024 and then ease. “We are still far from the highs reached in the 2008 financial crisis”, says Judit Montoriol of CaixaBank Research. The current crisis differs from that period: banks are financially stronger and households have greater savings, which shapes the response of lenders and borrowers alike.
This abrupt shift has compelled lenders to rethink strategies. After years of steering households toward fixed-rate products during extended periods of negative rates, banks are now applying similar thinking to variable-rate loans. “The price of floating mortgages is falling while fixed mortgages rise. Some banks push fixed rates as high as 3% or 4%, though others still offer mixed or flat rates around 1.5%.” says Garriga.
Borrowers with variable mortgages must crunch the numbers. “Six months ago there were better options, but fixed prices have become less expensive again, and options still exist”, notes Villén. Possible moves include risk transfer, loan termination and renegotiation with the current lender, or switching to another institution.
how to avoid bankruptcy
Some families face a bleak path forward with mortgage obligations. There may be a lifeline in the Good Practice Guidelines, a mechanism allowing eligible beneficiaries to receive help with payments if they meet certain criteria. HelpMyCash lists options such as paying only interest for five years or reducing the rate to Euribor +0.25% for five years. If monthly payments exceed 50% of family income, banks may reduce the outstanding capital on the loan.
real estate business
Home prices are not making mortgage eligibility easier. Fotocasa reports an 5.2% year‑over‑year rise in August. That pace could slow in 2023, driven by a boom in demand sparked by low rates, the desire for larger homes after lockdowns, savings from reduced spending, and millennials gaining access to the market. Now the sector is turning, with demand cooling and higher financing costs, but unlike 2008, activity is not expected to collapse.
CaixaBank Research projects a 2.8% dip in sales in 2022 and a 10.8% drop in 2023, with about 550,000 transactions this year and 491,000 the next. Housing cost growth is predicted to slow from 6.6% in 2022 to 2.2% in 2023. An economist with CaixaBank Research states the cycle should be short and that sustainable price growth may return in 2024.
Challenges for the industry
The real estate sector faces several hurdles, including rising construction costs and volatility in the gas market. Sergio Nasarre, professor of Civil Law at Rovira i Virgili University, highlights the struggle to access housing as a key issue. He notes that many people are sidelined, while renting becomes more prevalent as policy levers push households toward tenancy. “You can’t save if you pay rent. And rent costs are spiraling”, Nasarre stresses.
From 2007 to today, the share of property owners with mortgages has fallen—from around 80% to roughly 75%. The trend points to a society increasingly dominated by landlords, Nasarre concludes.
REAL SITUATION: Fear of not eating
Lídia bought a home in 2008 just before the crisis hit. The Euribor rise pushed her monthly mortgage from 520 euros to 1,200 euros. Her husband lost his job, and stress grew as basic needs strained. With quotas expected to rise again, she worries about feeding her family and keeping her children in school. The Mortgage Affected Platform (PAH) reports that if the situation does not improve soon, default and eviction scenarios could rise, particularly for those who recently obtained credit. PAH anticipates housing law this quarter that would include social rent options, anti-eviction measures, and a second-chance framework. In early 2022 there were 11,000 evacuees in Spain during this period, up from the previous year.