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Euribor explained:
What it is and why it’s more trustworthy than it used to be.
If you’re thinking of buying a home in Spain, you’ll hear the word “Euribor” in your very first conversation with a bank. It’s the index most commonly used in Spain for variable-rate mortgages, so it’s worth knowing what it is and how it has changed.
Euribor is the interest rate at which European banks could borrow euros on the market. In other words, it’s the price of money between banks. It’s published every business day and comes in several maturities. For mortgages, the one that matters is usually the 12-month Euribor: The Bank of Spain works out the monthly average of its daily values and publishes it in the BOE, Spain’s official gazette.
On a variable rate mortgage, your interest rate has two parts: Euribor, which moves, and a margin (the “diferencial”) agreed with the bank, which is fixed. For example, if Euribor is 2.5% and your margin is 1%, you pay 3.5% interest. If Euribor is higher at your next review, your monthly payment will be higher. If it’s lower, your payment will decrease.
Why trust was lost?
In 2013 the European Commission fined six institutions a record €1.7 billion for taking part in cartels linked to benchmark interest rates. Four of them had coordinated trading in Euribor related derivatives between 2005 and 2008. A second fine, of €485 million, followed in 2016 against three more banks over the same Euribor cartel. The Commission punished the banks’ cartel. It did not establish a specific loss for each individual borrower. What has changed now?
- Fewer opinions, more real deals (2019). The old index relied on quotes submitted by a panel of banks, which left room to influence the result. Since the reform, it uses actual transactions in the market wherever they exist. On 2 July 2019, Belgium’s financial regulator, the Financial Services and Markets Authority (FSMA), gave the European Money Markets Institute (EMMI), the organization that runs Euribor, official approval to keep running it under the EU’s rules for financial benchmarks.
- European supervision (2022). In January 2022, oversight passed to the European Securities and Markets Authority (ESMA), the EU’s securities markets authority. The FSMA said that the index was sturdier and less open to manipulation than it was a few years earlier.
- Fewer estimates (2024). When there weren’t enough real transactions, banks used to fill the gaps with their own estimates (known as “Level 3”). In January 2024, about 44% of the data behind the 6- and 12-month rates still came from those estimates. That step has now been scrapped, so the rate relies more on market prices and less on what banks think the rate should be. The updated rules were approved in February 2024.
Euribor still isn’t purely transaction based, because for many maturities there simply aren’t enough trades each day. So, it keeps fallback levels for when transactions are missing.
What it means for you and your mortgage?
More reliable doesn’t mean lower or steadier. Euribor still reflects what the market expects the European Central Bank to do with rates. Its monthly average hit 4.160% in October 2023, and in August 2026 it was 2.855%. The reform reduces the risk of manipulation. It does nothing about the risk of rates going up.
Before you sign, compare offers by looking at the margin and how often the rate is reviewed, and think carefully about whether a fixed, variable or mixed mortgage suit how much risk you’re comfortable with. Our job is to help you work that out with real numbers and no surprises.
Should you have any inquiries regarding the content of this article, or any other questions relating to mortgages in Spain, please do not hesitate to reach out to us for further information.
Patricia Nadal