The record low Euro Interbank Offered Rate, or Euribor, and subsequent low mortgage rates which have been driving the Spanish property market recovery over the last 24 months are set to continue for at least a further two years.
The Euribor sets an average rate of interest from which most Spanish mortgages are calculated with September marking an eighth consecutive month in negative rates reaching a record low of 0.057%. Initially expected to be a temporary situation when the rate first dropped below zero back in February, analysts now believe the European Central Bank will continue to hold the Euribor rate in negative until late 2018 or early 2019. Some experts are even predicting the Euribor rate could drop even further, possibly as low as 0.1%.
What this means for Spanish home owners is the likelihood of monthly mortgage repayments remaining low or possibly even dropping lower over the next two years, for banks it means a reduction in the long term profitability of granting home loans.
In response the first six months of this year saw the highest yet recorded proportion of new mortgages on fixed rate terms as banks look to secure their short term cash flow and property buyers take advantage by locking into the current low rates and profit over the next twenty or so years.