Mortgages in Spain now under review are up 54 percent

by Lorraine Williamson
mortgage review

MADRID – Spain is a country with relatively many homeowners. In three out of four cases, these owners have taken out a variable mortgage to pay off their home. However, if their term is under review this month of March, that means a significant increase in the monthly amount. 

The Euribor closed at 3.533% at the end of February, the highest level since November 2008. Moreover, without any sign of reaching a ceiling, with all the consequences for household purchasing power. 

Some four million households in Spain will review their mortgage payments in the first months of 2023. This is shown in calculations by the Bank of Spain. Those who have to do it this month of March will see the monthly amount increase by 54%. That is to say, a family that paid a mortgage of €600 until today can now count on a new monthly amount of €924. 

Attack on household spending space 

“This increase will be a direct attack on the spending power of Spanish households,” warns Rafael Moral, head of Hipoo’s mortgage analysis department in El Mundo. According to another financial comparator, the increase in fees that will be reviewed this month will translate into about €300 more per month (just over €3,500 per year). Although it may be higher depending on the terms of the updated loan, they warn. 

Related post: Euribor at highest value since 2008 

Euribor is rising faster than expected as a result of the interest rate increase that the European Central Bank (ECB) initiated in the summer to keep inflation under control. A year ago, in February 2022, the Euribor was negative at -0.335%. 

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Rise until when? 

The bad inflation figures released last week for Spain (6.1%) and France (6.2%), with the highest monthly increase since 1978 and with a new record for core inflation in the case of Spain, do not foresee a trend break in the strategy from Europe. Experts assume that the Euribor will continue to rise in the coming months and will reach or even exceed 4% in March. 

Miquel Riera warns that the Euribor will close March at almost 4% or even more. Riera is a mortgage specialist at HelpMyCash. “The Euribor, which represents the average interest rate on interbank loans, is usually between 0.5 and one percentage point above the ECB rate,” he warns. 

Although the ECB started its rate hikes in June, more people are now noticing the side effects in the first months of 2023. Most financial entities are now carrying out the annual review of the variable mortgages that they still have. 

54% more 

And precisely that increase is more than substantial: for a variable mortgage of €150,000 over 25 years with a difference of Euribor +1%, a monthly instalment of €533.31 was paid at the beginning of 2022, for example. However, if it is your turn to revise this month, your monthly amount will increase to €819.34 according to Hipoo’s calculations. That’s about 54% more. 

600 euros per month more with an average mortgage 

That is for an average mortgage (the INE sets it around €149,000) but if the amount owed is higher, this logically also applies to the increase: for a mortgage of €300,000 over 30 years, the bill will increase by about €600 to around €7,250 extra per year. 

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