Banks Double Mortgage Interest Rates in Less Than a Year

The average interest on new mortgages for the month of May stood at 3.71%

A year ago, the European Central Bank altered its monetary policy, marking the first interest rate hike in over a decade, with an aggressive 0.50% increase. Since then, rates have climbed, with eight consecutive hikes, causing Spanish banks to double mortgage interest rates in under a year.

In May, the average interest rate for new mortgages hit 3.71%, a 106% increase from July 2022. This surge has led Spanish households to allocate nearly 40% of their annual gross income to mortgage payments, a level not seen since the 2011 financial crisis.

The primary driver is the rise in rates directly affecting the Euribor, the main index for most variable-rate mortgages in Spain. In June, this index reached 4%, up over three percentage points from the same period the previous year (0.287%).

In response, banks have adjusted their mortgage offerings, raising fixed-rate prices due to increased demand for payment predictability. They've also lowered variable-rate prices to attract a wider audience.

Forecasts anticipate further increases, potentially reaching 4.5% in the coming months. While the index continues to rise, major predictions suggest no significant deviation.

Finding a fixed-rate mortgage below 4% APR is challenging. BBVA offers a 3.82% APR if the client links three products. Without these links, the APR increases to 4.55%. OpenBank offers a 3.6% APR for specific conditions. EVO Banco also offers a fixed-rate mortgage below 4%.

For variable-rate mortgages, EVO Banco offers Euribor + 0.48% with specific conditions. BBVA offers Euribor + 0.60% (with linked products) or Euribor plus 1.6% (without linking). OpenBank's offer is Euribor + 0.60% with linked products, which increases to Euribor + 1.10% without linked products. KutxaBank offers Euribor + 0.49% with specific conditions. If the client prefers not to link, the offer is Euribor + 1.49%.