The Eurozone interest rate has now marked its fourth anniversary in negative figures, meaning mortgages in Spain and other common-currency nations will continue to be low – in fact, the closing figure for February was the second-lowest in 14 months.
Spanish variable-rate mortgages are set according to the euro interest figure, or Euríbor, and unlike in the UK, are re-valued annually, not constantly; this means if the interest rate shows signs of possibly rising, homeowners have up to 12 months to plan and work out whether a fixed-rate loan would save them money.
It also means no fluctuation in monthly repayments, so a sudden, one-off spike in the Euríbor will not mean an unexpectedly expensive month.
For this reason, and especially as a fee applies to set up fixed-rate loans, the vast majority of mortgages in Spain are variable rate.
Luckily, in the past, the Euríbor has not changed dramatically and suddenly from year to year and any rises have been very gradual, meaning rearranging an existing mortgage has not had to be an emergency.
The Euríbor first dropped below zero in February 2016, something never seen before and which led some homeowners to question whether they would actually get a rebate on their repayments, or pay less than the capital due – but the answer was, of course not.
Banks tend to set their mortgage interest rates at the Euríbor plus a given percentage, which means their cost has nearly halved since 2007 and 2008 when they were at their peak.
At the beginning of 2019, it was feared the honeymoon may be over when the Euríbor started creeping above zero again, but at its highest since then it only reached -0.082%, in March, after which it started to drop, falling once again into negative in June.
And compared with late 2007 and early 2008 rates of around 5.3% – or even the 2% to 3% after 2002 when Spain first adopted the euro – few homeowners were truly panicking.
The Euríbor in the last 14 months, from January 2019 to February 2020 inclusive, was at its lowest in August when it dropped to -0.187%, and a steady climb started to reverse again in December, when 2019 closed with a rate of -0.135%.
As at the end of February, the Eurozone interest rate was -0.179%, and no plans are afoot for it to rise greatly any time soon.