Spanish mortgage interest rates set to remain low for 2 more years

Driven by increased activity in the Spanish property market over the last 18 months, analysts believe the record low level of the Euro Interbank Offered Rate, or Euribor, could be prolonged for at least another two years and fixed rate mortgages could continue to grow in popularity in Spain.

In September, Euribor's average rate was a record low of -0.057%, the eighth consecutive month in negative territory. While the general expectation was that the rate would change shortly after it first dipped below zero in February, due to growing uncertainty in the Eurozone's financial markets because of factors such as Brexit, it is now far less likely that the European Central Bank will adopt a tougher line in its monetary policy. Analysts now expect that it will not be until late 2018 or early 2019 until the Euribor alter the rate.

Low mortgage interest rates are contributing to the attractiveness of Spanish property market and is expected to have a significant impact in the months to come, particularly in prime coastal areas such as the Costa del Sol where prices have already risen by 6.2% over the past 12 months. Further, in the first 6 months of 2016, 12.1% of all new mortgages in Spain were on fixed rate terms, the highest proportion recorded yet.

Given the current outlook within the banking sector, the growth is expected to continue as banks are keen to guarantee short-term cash flow and property buyers are eager to lock into the low rates available and benefit from them over the next twenty or thirty years.