Else Beekman
Spain’s mortgage market is seeing significant shifts as interest rates continue to fall. This is particularly the case for fixed-rate mortgages, which have become increasingly popular. As banks introduce competitive offers to attract customers, demand for fixed-rate loans has surged by 54% in the past year.
These mortgages currently offer a lower average interest rate of 3.02%, outperforming the 3.51% average for variable and mixed-rate loans.
In recent months, the European Central Bank’s decision to cut interest rates has had a strong impact on Spain’s real estate market, driving a notable increase in property purchases. According to Spain’s National Statistics Institute (INE), mortgage agreements in July rose by 23.5% year-on-year, with 36,260 new loans issued, followed by an 8.8% rise in August. As a result, mortgage lending saw €4.45 billion loaned in August, with an average mortgage value of €145,352.
Fixed mortgages favoured over variable and mixed options
Fixed-rate mortgages now account for over 61% of new mortgages, up from just 38.7% for variable loans. Financial experts point to a steady decline in the euríbor index, which influences variable-rate mortgages. The euribor recently dropped below the 3% mark and is currently at 2.727% for October. Marcel Beyer, head of iAhorro, highlights in Infobae.com the growing preference for fixed rates as borrowers look for stability.
Fixed rates could drop even lower
The last quarter of the year traditionally sees more competitive mortgage offers as banks aim to meet annual targets, which could lead to further rate cuts. Beyer anticipates “good conditions until year-end,” which may see fixed rates drop below 2% if euríbor rates continue to decrease.
With fixed-rate mortgages likely to reach even lower rates, mixed mortgages, which offer an initial fixed rate before switching to a variable rate, could become obsolete. Ricardo Gulias, CEO of RN Tu Solución Hipotecaria, predicts that if fixed rates drop below 2%, mixed-rate mortgages may lose appeal altogether.
Rising property prices offset affordable mortgages
Despite improved mortgage rates, Spain’s soaring property prices may counteract these benefits for buyers. María Matos from Fotocasa warns that while loans are becoming more accessible, the higher housing prices may still discourage buyers. She notes, “This could leave potential buyers in the same position as earlier in the year,” as high prices might negate the advantage of lower loan rates.
In the coming months, many buyers may delay purchases due to limited housing availability, compounding an already significant demand. Experts suggest that unless more affordable housing enters the market, Spain’s property market may face stagnation despite increasingly attractive mortgage conditions