Current interest rates on Spanish mortgages

What do Spanish banks consider when deciding on a mortgage offer?

This varies slightly from bank to bank, but the most important factor is the client's financial situation.

Banks assess the type of income, its stability, and any existing mortgage or loan payments.
They also evaluate personal factors such as age, country of residence, income currency, and family situation

The personal situation like age, country of residence, income currency and family situation will also be important.

One key difference between Spain and many other countries is that equity in real estate outside Spain is not a major factor. Spanish banks focus more on outstanding debt rather than the value of properties you own abroad

Do all clients receive the same mortgage offers?

No, they don’t. Unlike in many other countries, the Spanish banking system is highly personalised and tailored, even for smaller mortgage amounts

Each application is reviewed individually, and depending on various factors, banks adjust mortgage terms, interest rates, and available mortgage types accordingly.

Are Spain’s largest banks very similar?

The Spanish banking sector is highly competitive. If one bank introduces attractive mortgage conditions, others typically follow soon after.
However, risk evaluation, scoring systems, and comfort levels regarding loan approvals differ significantly between banks.

While some factors such as maximum mortgage amounts and loan terms are regulated, other conditions vary widely.

Additionally, if a bank hasn’t met its mortgage targets, it may suddenly become more competitive in its offers.

Most variable rate mortgages in Spain are tracker mortgages linked to the Euribor reference rate. This means that the bank fixes your interest rate for either 6 or 12 months at a time, depending on the bank’s policy.

How and when is the interest rate on your mortgage adjusted?

After an initial fixed period of 12 to 60 months, the bank recalculates your mortgage interest rate based on the Euribor 12-month reference rate at the time of adjustment.
These automatic adjustments always occur on the same date. Some banks use 6-month intervals, while others apply 12-month intervals..

Although other reference rates, such as Euribor 3-month or 6-month, can sometimes be agreed upon, they are not commonly used in Spain.

During each adjustment, the new interest rate for the upcoming period is determined by adding a fixed mark-up (spread) to the Euribor rate at the time of the review.

The fixed mark-up is agreed upon in advance and remains unchanged throughout the entire mortgage term.

Example

If your agreed mark-up is 1.00% (fixed mark-up for the full term of the mortgage) and the Euribor 12-month reference rate is 2.40%, the interest rate you will pay on your mortgage for the following 6-12 months will be
1.00% (fixed mark-up) + 2.40% (reference rate) = 3.40% (final rate).

Euribor is a benchmark interest rate used across the European Union, published every working day.
Nearly all new variable-rate mortgages in Spain are now linked to the Euribor 12-month rate.

Who sets the Euribor rate?

Each working day, a panel of 21 major banks across Europe reports the interest rate at which they believe a prime bank would quote another prime bank for an unsecured loan.

Euribor rates represent interbank borrowing costs, commonly known as interbank rates, and are not directly available to private individuals.

The European Money Markets Institute (EMMI), based in Brussels, is responsible for calculating and publishing the daily Euribor rate.

EMMI in Brussels that sets the Euribor rates

How is it calculated

At 11:00 CET, once all panel banks have submitted their rates (based only on transactions exceeding €10 million), an average is calculated.
The panel banks reports on 5 different tenures (1 week, 1-month, 3-month, 6-month and 12-month rates).
These rates reflect the cost of borrowing money between banks for each respective period.

Why is it important?

Since interbank borrowing costs play a crucial role in how banks set mortgage interest rates, Euribor has become a key benchmark in the mortgage market.
Following its introduction in 1999, Euribor quickly became the primary reference index for mortgages across Europe.

The rate used to determine mortgage interest rates (and shown above) is the monthly average of all daily Euribor quotes for that period.

In Spain, the Banco de España (the central bank) publishes the official monthly Euribor rates used for mortgages.

In Spain, you can lock in the interest rate for up to 30 years.

Fixed rate mortgages in Spain

Following a sharp rise in interest rates after the historically low period from 2016 to early 2022, many borrowers now prefer the security of a fixed-rate mortgage.
As a result, fixed-rate mortgages with terms ranging from 15 to 30 years have become more common.

If you choose a fixed-rate mortgage, your interest rate will remain unchanged for the entire loan term.

Alternatively, you can opt for what is known as a mixed mortgage, where the interest rate remains fixed for an initial period (e.g., the first 5–10 years) before automatically converting to a variable rate, which is adjusted every 6 or 12 months for the remainder of the term.

Why choose a fixed-rate mortgage?

The main advantage of a fixed-rate mortgage is predictability. You know exactly how much you will pay each month during the fixed-rate period, making it easier to budget for future expenses.

Why not choose a fixed-rate mortgage?

Fixed-rate mortgages usually come with higher early repayment fees than variable-rate mortgages.

In addition, you might lose out on lower interest rates if they decrease in the future.

Can everyone get a fixed-rate mortgage?

Not all banks are able to offer fixed-rate mortages for clients having an income in a currency different to the Euro.

Following a change in Spanish mortgage legislation in 2019, some banks can now only offer variable-rate mortgages to international clients with non-Euro income.