Cheaper mortgages in Spain as Euribor comes down again

The Euribor, which affects mortgages, loans and savings in Spain and the other common-currency nations, is predicted to sit at 0.16% by midnight on Monday, August 31, making it 0.308% lower than it was this time last year.

Bad news for those who live off savings interest, the Euribor's having plumbed new depths since the start of the crisis bodes fantastically well for homebuyers and existing mortgage-holders, or anyone with a personal loan or outstanding credit card balance.

Compared with the end of 2007 and early 2008 before the housing market crashed and the recession started to bite, when the Euribor sat at over 5.5%, properties were out of reach for first-time buyers or anyone seeking to purchase their first main residence or holiday home in Spain.

But at 0.16%, and with residential property at prices lower than 13 years ago even in tourism hotspots, monthly mortgage payments are now an average of half the likely long-term rental income on any given home.

Banks are keener than ever to agree to mortgage loans after a long period of having closed their doors to new customers, although as yet nearly all of them expect deposits ranging from 20% to 40% of the value.

Some are starting to agree 100% or even 110% mortgages – the latter being to cover the fees involved in buying a home and setting up a loan, which are typically 10% of its sale price – and although they are few and far between, they are the key to getting young adults onto the housing ladder and to encouraging foreign buyers who do not have the disposable income available to purchase in cash.

August 2015 started out with a Euribor of 0.166%, and has now dropped to 0.16%, meaning anyone whose annual interest rate payments are updated in September will see a saving of tens or even hundreds of euros per year.

A homeowner with a 20-year loan of €120,000 will see a difference of €200 a year, or €16.67 a month.

Analyst Javier Urones of XTB says that as the Euribor was already very low in July, few homeowners will see a difference in their monthly quota, but even €5 or so off the existing figure means more in capital being paid off and less in interest.

Europe's gradually-stabilising economy has a lot to do with Euribor rates being able to remain low, Urones says, and stresses that the Yuan crisis in China has not affected Eurozone interest rates, even though it has caused a temporary stock market crash across the continent.