The European Central Bank has signaled rates could rise by as much as 3.75% if the official price of a coin moves up by 0.25 points, a fresh blow to borrowers with variable mortgages or those seeking a home loan. While the initial market reaction was a modest dip, this rate hike in the financial sector is viewed as a natural adjustment. Euribor is steered toward a 4% trajectory, further pressing family budgets across North America and beyond.
In Alicante, where the average mortgage hovers around 105,000 euros, the latest data from INE show that next month a borrower facing a rate review will pay about 208 euros more than last year. If calculations are based on the minimum Euribor rate set in December 2021, the increase rises to 232 euros. In practical terms, this adds roughly 2,800 euros in a year, a burden many households now feel acutely.
With the typical mortgage term at 25 years and a 1% rate difference, the average monthly payment is set to exceed 600 euros from May onward. That level of payment is already heavy for many families, prompting a wave of changes and cost-cutting measures across budgets.
As a result, more households are seeking ways to soften the impact. These include negotiating partial waivers of unpaid amounts, renegotiating loan terms with banks, or transferring the mortgage to another lender through refinancing or consolidation. In some cases, people are even pursuing a new loan to cancel the old one.
Thus, from the iAhorro portal there is already coverage of up to 40% of this activity. That means customers looking for cheaper mortgages are entering the market, even when the job adjustment is not easy. A spokesperson for the comparator, Laura Martinez, notes that fixed-rate loans signed recently average around 3%. Yet new offers for current seekers hover near 4%. When it comes to variants, differences have narrowed to under 0.5%, but given Euribor’s direction these options remain more expensive than earlier loans. (Source: market commentary and industry data)
A building under construction in Benidorm, archive.
Demand for loans and mortgages has declined at what analysts say is the fastest pace since the financial crisis. This presents a mixed picture for mortgage holders, with some opting for a blended approach that combines a fixed rate for an initial period with a variable rate for the remainder of the term. Martinez notes that shorter fixed tranches tend to offer lower initial rates, sometimes around 2% in the best cases, though the share of transactions in this category remains about half of the total.
more demanding requirements
Beyond the financing conditions, lenders have tightened underwriting standards. Miquel Riera of Help My Cash explains that as borrowing costs rise, banks place greater weight on employment stability, income levels, and the borrower’s ability to service the loan. A higher income and stable job can help, but financing more than 80% of a property’s value is increasingly unlikely. In practice, many applications are rejected when the risk is judged too high.
Latest statistics from INE show that in January and February the province of Alicante approved 3,323 new mortgages, an 8.5% rise from the same period last year. However, Riera cautions that INE’s reports reflect data from the Property Register, which can lag reality by a few months, implying that the current pace may be slower. The Council of Notaries reports a 26% drop in the signing of new housing loans across the country, suggesting the headline figures may overstate current demand slightly.
Up to 1% difference for premium customers
While Euribor-driven rate increases have tightened overall credit conditions, demand has softened, and lenders are competing more aggressively for borrowers deemed reliable. Civil servants and workers in high-income sectors with low unemployment sometimes receive offers that are up to 1% lower than the typical market rate. For example, fixed-rate mortgages at around 3% annual interest are occasionally available to these buyers, even as the broader market holds steady against higher costs.