Spanish banks slash mortgage interest rates to below 2.5%

HOMEOWNERS can make real savings in 2025 – but they'll need to shop around first.

After years of grappling with spiralling interest rates, cheaper mortgages are taking the pressure off households and leaving them spoilt for choice as they sift through a growing range of better offers.

High-street banks are cutting rates dramatically this year, with many now below 2.5% in what appears to be a 'price war' to win back customers.

Biggest interest cuts on fixed- and mixed-rate deals

Fixed-rate and mixed-rate loans – which began to outstrip variable-rate mortgages in 2022 for the first time in Spain's property-buying history – make up most of the deals at the heart of Spanish banks' ever-increasing competition, and are currently seeing the largest rate cuts.

But for owners and buyers who prefer not to commit themselves, it's still possible to find cheaper rates among variable types, which traditionally feature lower interest than the other two due to the heightened risk involved.

The average interest rate on any mortgage as at January 2024 was 3.45%, but by January 2025 this had dropped to 2.7% - meaning loans across the board are getting cheaper.

BCE set to cut rates further

Spanish mortgages are linked to the Eurozone interest rate, or Euribor, which was in negative figures from February 2016 until April 2022, soaring to 4.149% by July 2023.

The Euribor closed January 2025 on 2.526%.

According to analysts from the price comparison site HelpMyCash, the European Central Bank (BCE) intends to continue with its interest-rate cutting policy, which started last year, throughout 2025.

So, in theory, there may be no need to rush into a new loan deal just yet, as HelpMyCash predicts there'll be plenty more to come.

Check lenders' conditions – not just prices, warn experts

Cheap deals on fixed- and mixed-rate mortgages are becoming more frequent, but homeowners and buyers should decide whether the conditions attached to each offer will suit them, HelpMyCash warns.

These can include a requirement for your wages or other monthly income to be paid in directly to a current account with the same bank, or purchasing the entity's own life insurance and household insurance – conditions which may also apply to variable-rate loans.

Other lenders do not make these factors obligatory to access the deal, but instead reduce interest rates for each in-house product purchased.

And some banks have opted not to charge setting-up fees on a new mortgage deal.

Variable-rate mortgages get more competitive

Spanish variable-rate mortgages are typically reviewed annually, which helps avoid constant fluctuations in expenses and gives homeowners time to plan if a rate change looks likely.

As a result, borrowers automatically get a one-year fixed rate in any case.

Some banks are offering new variable-rate mortgages at competitive first-year prices: CaixaBank (2.7% followed by Euribor plus 0.48%), EVO Banco (1.5% followed by Euribor plus 0.48%),and Kutxabank (1.71%, then Euribor plus 0.49%).

Mixed-rate mortgage interest drops to 'around 2%'

Owners and buyers looking for extra stability can apply for a mixed-rate mortgage – fixed for five to 10 years before converting into a variable rate. HelpMyCash, and popular Spanish 'money supermarket' Rastreator, have revealed some of the most competitive on the market right now.

One is Deutsche Bank's Hipoteca Mixta Protección DB, which offers a 2.3% rate for the first five years, after which it becomes a variable rate of the Euribor plus 0.6%.

Another is Kutxabank, with a 2.39% interest rate for 10 years and Euribor plus 0.64% thereafter.

Cheaper still are EVO Banco at 2.05% for five years; Openbank at 2.51% for five years – both followed by Euribor plus 0.6% - but the best money-saving deal found by Rastreator is with Unicaja, at just 1.35% for five years followed by Euribor plus 0.45%.

Fixed-rate mortgages below fall 2.5%

Banco Santander offers a 2.55% fixed rate which can be reduced to as little as 1.45% for contracting extra services – having your salary of at least €600 a month, or pension or unemployment benefit of a minimum of €300 a month, paid into a Santander account automatically brings the rate down to 2.5%.

EVO Banco rates start at 2.45%, but you can reduce it to between 2.44% and 2.41% by taking out home or life insurance or opening a current account for your monthly income.

Spanish lenders will normally only finance up to 80% of the value of a main residence and a maximum of 60% for a second or subsequent property, although Banca March will lend up to 70% for a buy-to-let or holiday home.

As long as you take out insurance and a current account for your monthly income, Banca March's fixed-rate deal is the cheapest on the market at present, at 2.3% - lower than than that of CaixaBank, which gives the same conditions for a 2.5% rate – but redemption penalties are high. If you pay your mortgage back in full or part pre-term, Banca March charges the maximum allowed by law, being 2% of the loan in the first 10 years and 1.5% thereafter.

If you need a loan to finance your new home in Spain and are not familiar with the system, you might find it useful to read up on key terms to help you understand your Spanish mortgage before you start your search for the best deal.