Spanish mortgages go down as Euribor ends 2017 on historic low

MORTGAGES in Spain have gone down again as the Eurozone interest rate, the Euribor, has ended its second consecutive year in negative figures.

And analysts predict it will continue to fall in 2018, or remain the same.

Having reached levels of over 4.7% in September 2007 and soaring to its highest-ever rate of 5.5% in October 2008, the Euribor has been falling consistently since 2009 and ended 2017 at -0.19%, dropping from -0.189% the previous month.

The difference between monthly mortgage payments in Spain during the Euribor's peak nearly a decade ago, and its ongoing minus figures in the last two years, means a saving of around 40% between the two extremes.

And variable-rate mortgages which are due for review in the early part of this year are expected to be a few euros cheaper.

Based upon the typical mortgage in Spain – a loan of €120,000 over 20 years on a Euribor+1% scheme – homeowners will save €5.84 a month, or €70.08 a year.

Over 80% of mortgages in Spain are on a variable rate since, with the exception of the housing market 'boom' years of 2007 and 2008, these generally work out cheaper and, as they are only reviewed once a year, homeowners have plenty of time to act and convert to a fixed rate if it looks likely that interest will rise sharply.

But December 2017 was the 23^rd consecutive month that the Euribor has been in negative figures.

The rate has been below 1% for even longer – since April 2009, with the exception of the period from May to November 2011 inclusive – and below 2% since February 2009.

Until late 2006, the Euribor remained relatively stable at between 2% and 3.5% from early 2002, with little variation from month to month.

But even these rates are very unlikely to return for a long time to come, according to analyst Rodrigo García from the Spanish economic consultants' firm XTB.

He says the Central European Bank (BCE) is determined to continue its low rates in order to stimulate the Eurozone economy and that its tendency towards 'prudence', based upon its historic monetary policies, shows that few changes are likely in 2018 and that any which do occur could see a continuing downward trend in the common currency interest rate.