This mortgage landscape shows constant-term rates that banks have long envied, driven by the negative Euribor base that has historically underpinned housing finance. Recently, these dynamics have begun to tilt toward variable-rate products. The trend is not likely to reverse soon as higher money prices and new policies from financial institutions point to a continued shift over time. The latest data from the Spanish Mortgage Association (AHE), which includes the main banks, confirms that in May, new variable operations rose by eight-tenths from April, reaching 20.9 percent of total loans. Fixed-rate approaches fell by the same margin, settling at 79.1 percent.
May results were buoyed by a rebound to 23.1 percent in January, slightly below the five-month average of 2022 when variable mortgages hit 21.6 percent. This marks one of the lower levels seen in recent years. In 2021, fixed-rate contracts finished at 25.1 percent, while 2014 saw a peak of 64.5 percent for fixed terms. Back then, loans fixed for more than ten years accounted for just 0.8 percent of the total. A turning point came in 2016 when policy decisions by the European Central Bank moved money prices toward zero, with Euribor turning negative for the first time that year. Variable mortgages carried the burden of low margins for banks, prompting commercial strategies to attract customers toward fixed-rate loans with the promise of installment stability for the life of the loan. Those fixed products were more expensive for borrowers. By the end of 2016, variable-rate share stood at 46 percent, nearly twenty percentage points lower than two years earlier.
rates rise
The outlook shifted dramatically at the start of the year, especially after the Ukraine conflict and the rapid rise in inflation that pushed the European Central Bank to raise rates by half a percentage point in July. More increases are anticipated over the course of the summer. Euribor has climbed alongside ECB measures for months, standing at 0.852 percent in June after an uptick of 50 basis points from May. A year ago, it hovered around negative 0.4 percent, making the year-over-year rise notable. As the Spanish Mortgage Association notes, the dominance of flat-rate allocations may begin to soften in new loans in the medium term. Companies are adjusting pricing policies to the new operating framework, tightening bids on fixed rates to steer clients toward variable mortgages.
Deposit
For borrowers and households with deposits, the shift is less daunting and, in some cases, even favorable. The ascent in interest rates tends to improve deposit yields, while those without mortgages see potential benefits in higher returns on savings. The Bank of Spain highlights that Euribor closed June at 85 basis points, implying a difference of roughly 40 percentage points higher than typical periods for bank deposit rates. As a result, the banking system is increasingly incentivized to raise money, and deposit fees are expected to rise in the coming months as funding costs climb.