10/08/2010
Euribor (12 months), the interest rate predominantly used to calculate mortgage payments in Spain, has now risen for 4 consecutive months to its highest level in just under a year. Euribor reached 1.373% in July, an increase of 7% on the previous month, and just 3% below July last year.
This is the first time that Euribor has lept by more than 7% on a monthly basis since June 2008, when the credit crunch was brewing.
It is interesting to note that, from June to July, Euribor went from being 20% below the same month last year, to just 3% below.
As a result, borrowers on annually resetting mortgages will hardly see any savings. Repayments on a typical annually resetting mortgage (150,000 Euros, 25 years) will fall by around 3 Euros/month, or 30 Euros/year.
If Euribor stays on a rising trend, as many expect it to, borrowers will soon start seeing their monthly payments increase. Repayments could start rising as early as September.
New mortgage lending
New residential mortgage lending fell by 3% in May compared to the same month last year, according to the National Institute of Statistics (INE). This means that a fundamental indicator of the health of the housing market is flashing red.
There were 55,755 new mortgages for property in Spain signed in May, slightly up on April, so at least on a monthly basis the news was better.
The average loan value was 114,900 Euros, a fall of 4.4% compared to last year, but a fraction higher than April.
Overall new residential mortgage lending was 6.4 billion Euros, down 7% on last year.
The average interest rate was unchanged from April at 3.92%, 14.8% below May 2009.
