A good time to buy
Euribor (12 months), the interest rate normally used to calculate mortgage payments in Spain, fell 0.8% in January compared to the previous month.
- Euribor now stands at 1.232%, the second lowest level on record.
- Euribor rose a fraction in December, suggesting that, after 14 consecutive months of falls, a change of trend might be in the offing. Despite a return to declines in January, that is still probably the case. Flipping around is often consistent with a period of change.
- After January’s fall, Euribor is now 53% lower than it was a year ago. That means borrowers on annually resetting mortgages can expect some relief in their mortgage payments.
- As a consequence of the latest reduction in Euribor, repayments on a typical mortgage (150,000 Euros, 25 years, Euribor +0.75%) will fall by around 100 Euros a month, or 1,200 Euros a year.
- Most of the savings from the fall in Euribor have already been had, and Euribor is unlikely to go much lower. By March borrowers on annually resetting mortgages will hardly notice any savings, even if Euribor goes a bit lower.
- Euribor is based on interest rates set by the European Central Bank. Base rates are expected to remain at 1% for the first quarter of 2010, rising gradually after that.
Clearly now is a good time to buy property in Spain.
- There were 52,043 new mortgages signed in November, up 1.8% compared to the same month last year, according to the latest figures from the National Institute of Statistics (INE). That is the first time in 2½ years that monthly new mortgage lending has risen on an annualised basis.
- The average new mortgage value fell by 12%.
- The good news is the decline in new mortgage lending has been bottoming out in the last few months. If the trend continues new mortgage lending will soon be growing again year-on-year in volume terms. That will give some support to the housing market.
- However, new mortgage lending is still a far cry from what it was during the boom, or even what it should be during normal times.
Leave your comment