THE SITUATIONThe Bank of Spain raised rates last week to 3%. – This is the fifth rate rise after the half point increases in December and July, and the previous 0.75% increases in September and October. – Another 50 basis point rise is forecast for March, following which the Bank “will assess the future path of its monetary policy”.
Although it is probable that Euribor will stay between 3.5% and 4% this year, it is difficult to predict where mortgage rates will end the year, as this depends on what happens with inflation, European Central Bank (ECB) policy as well as the war in Ukraine.
As a consequence of the stagnation or reduction of new loans and purchases, it is only logical to expect property prices to fall in the short term.
Given the current situation, is it worth buying a property in Spain at the moment?
This question is frequently asked by our clients and although we cannot predict the future, what we might see (according to some observers) is a steady increase in property prices in some areas of Spain. For example, in the Baleares, the annual rise as per January 2023 has been almost 9% and it may be that prices here remain more stable than elsewhere.
Another important factor to consider is that, in an historical context, current rates are still relatively low. With inflation on the rise, it was to be expected that interest rates would follow. If you would like more information on the evolution of Euribor since 1999, have a look at this interesting chart: https://www.euribor-rates.eu/es/graficos-del-euribor/
Opting for a fixed vs a variable rate: for our EURO earning clients, we still have access to competitive fixed rates.
EUR income (if your income is received in euros):
Opting for a mixed type mortgage: a fixed rate for the first 5 or 10 years, then variable.
NON-EURO income (if your income is received in a currency other than euros):
|Initial period – FIXED||Remaining period – VARIABLE|
|5.45% fixed, for 5 years||Euribor + 1.69%|
|5.15% fixed, for 10 years||Euribor + 1.49%|
The total duration of the mortgage cannot exceed 30 years.
CASE STUDYTo show this in a typical situation, below is an example of how a mortgage of 250,000€ could look when arranged by Spectrum International Mortgages (for a EUR income earning client not fiscally resident in Spain):
- Property Price – 357,000€
- Mortgage amount – 250,000€ (Loan to value: 70%)
- 20 years fixed rate – 3.55%
- Total duration – 20 years
- Monthly installments – 1,456€/month
FAST AND EFFICIENT SERVICE
With our experience and expertise, we ensure that your mortgage application is handled as quickly as possible, assuring you of the “locked in” from the start. We will also review all aspects of your application, making sure that all additional costs, if any, are understood and agreed at outset. Some banks might, for example, insist on life and house insurance, payment protection insurance, credit cards, etc. We will be here to assist and explain, every step of the way!
The rates we mention in this article are based on those currently available at the time of publishing and we cannot guarantee that these rates will be available in the future. If you would like a personalised quote, please get in touch with us.