Over four in 10 new mortgages in Spain are fixed-rate deals

A sharp rise in the number of fixed-rate mortgages in Spain has been reported in the past two years – and they now account for 43% of every new loan taken out.

Until spring 2022, mortgages with an interest rate set for between two and 10 years were almost unheard-of in Spain, particularly as variable-rate loans are reviewed annually, meaning relative security in everyday financial planning. But the unprecedented hike in the Eurozone interest rate, or Euribor, from below zero to above 4% - going from negative figures to over 3% in seven months in 2022 – have led to homebuyers opting for greater long-term stability.

Variable, mixed or fixed-rate mortgages

Variable-rate mortgages, which follow the Euribor, are, by default, one-year (or six-month) fixed-rate deals, since the interest that applies is adjusted annually, meaning no unplanned monthly fluctuations to deal with.

Some loans now operate a hybrid system between fixed and variable rates, and are known as 'mixed mortgages' or hipotecas tipo mixto. These have risen from 14% of new home loans in mid-2022 to 40% in the final quarter of 2023.

Fixed-rate mortgages with a set level of interest remaining the same for between five and 10 years are also fast becoming the norm for homebuyers. Between spring 2022 and the end of 2023, they rose from 4% to 17% of new loan deals.

Altogether, mixed and fixed, with a minimum set interest rate of five years, accounted for 43% of new mortgages contracted up to the end of November 2023, according to statistics published by the Spanish Mortgage Association (Asociación Hipotecaria Española, or AHE).

A 'mixed-type' mortgage, the AHE explains, is where the interest rate remains the same for a period of between one and 10 years – effectively, a short-term fixed-rate deal – after which it reverts to a variable-rate loan.

'Pure' fixed-rate loans, with set interest rates for up to 10 years and the option to renew these once the deal expires, continue to make up a significant chunk of new mortgages – but their popularity has declined since the initial Euribor rises.

Shift in mortgage trends amid interest rate hikes

Back in June 2022, when the European Central Bank (BCE) started a chain of dramatic, consecutive monthly increases in interest, fixed-rate loans came to make up a massive 67% of new mortgage deals. This has now dropped to 43%, amid cautious optimism that the Euribor may start to come down again as Eurozone inflation levels stabilise.

Traditionally, variable-rate loans made up the bulk of new mortgages, and those still in force since before the Euribor increases – which have not been replaced or renegotiated – as opposed to new loans continue to make up 55% of active loans. By contrast, post-2022 new mortgage deals on a variable-rate basis only account for 16% of the total.

The AHE reports that more stringent conditions applied by lenders for granting mortgages have reduced the overall number and amount of funding, and more and more owners who are able to do so have been paying off their mortgages completely in the past two years.

Homeowners nationwide, in 2023, spent €22 billion on overpayments with the aim of completing their mortgage terms ahead of time – around 77% more than in 2022. At present, a national total of €480bn is on loan to homeowners, being around 3.3% less than at the end of 2022, and 0.7% less than in mid-2023.

Mortgages for home refurbishments are in decline, falling 5.5% in the past year, down to just under €15.7bn, and loans for property developers have descended 'sharply', the AHE reveals, dropping by 7.4% in a year, or by just over €7.6bn. Some of this is due to a lack of 'brown site' or building land, says the AHE, following the housing market collapse in 2008 caused largely by excessive and mostly speculative development.

If you would like to find out more about the different types of mortgages in Spain and get an idea of which one might be more suitable for you, we recommend you read our article on fixed, variable and mixed mortgages.