Bad news for many mortgage holders as the European Central Bank has raised the official refinancing rate by 0.5%, a move that accelerates a climb already seen in Euro interbank rates aimed at curbing inflation. This shift is reflected in Euribor, the benchmark that many home loans use, and it is expected to push monthly payments higher for borrowers with variable-rate loans. The concern is especially acute for loans originated between 2012 and 2017, when margins tended to be higher and borrowers faced steeper adjustments as rates rise.
The rate increase, approved by the financial regulator, pushed the main mortgage reference higher this Friday. It has brought the daily reference rate up to around 1.2%, a level that makes July’s average interest rate the new baseline to watch, with the official rate now around 0.985% and predictions pointing toward surpassing 1% by month’s end. With Euribor already at -0.491% from last year, the move translates to a gain close to one and a half percentage points in less than twelve months.
In practical terms, this means for a Alicante mortgage with typical terms, a loan amount around EUR 107,000, over a 25-year repayment period, could see payments rise by roughly 1 percentage point. That could equate to an increase from about EUR 383 to EUR 459 per month, a difference of around EUR 76 monthly, or nearly EUR 912 more per year. For many households, this is a sizable strain on monthly budgets.
The impact is compounded when other rising costs are accounted for, including fuel, energy, and a broader basket of consumer prices that have climbed well above the prior year’s levels in the province. A household budget that already feels stretched will notice these added charges more acutely as annual inflation remains elevated.
Within this environment, borrowers who took out loans between 2012 and 2017 may face the most pronounced effects, since those deals often carry higher-than-average margins. Financial associations caution that such borrowers should review their terms with lenders to explore potential renegotiation options. Any action should be considered carefully, weighing fees, the potential rate type shift, and the long-term cost of extending a loan’s duration to secure more favorable monthly payments.
Experts predict that the cost of financing may differently affect new lending, but current official statistics have yet to fully reflect the impact of higher rates. May figures showed a noticeable uptick in loan activity. In Alicante province, 1,920 new mortgages were registered in May, a 30% increase year over year and the highest total in more than a decade. This rise signals continued demand for housing, even as borrowing costs move higher.
Mortgage issuance increased by more than 40% in the province of Alicante
To date, this year has seen 7,920 mortgage operations for a combined value of EUR 837 million, about 23% above the previous year. Some analysts attribute part of this surge to a decision by households to commit to home purchases in a climate of rising loan costs, signing on to loans with either floating or fixed rates depending on market expectations and personal risk tolerance. While lenders have begun to price floating-rate loans with greater caution, fixed-rate products have reached a record share, accounting for 73% of new contracts in the period in question.