Just as many British mortgages track Bank of England base rate, many in the Eurozone track Euribor, the Euro Interbank Offered Rate. While this is complex, what really matters to property owners with a mortgage linked to Euribor is that this latest provisional rate (data to be confirmed later today, but any deviation from the figure is likely to be minimal) rise brings Euribor to 4.665%, over a point higher than it was a year ago, and the highest it's been since the year 2000.
Spain's Instituto Nacional de Estadistica (National Institute for Statistics) has worked out that the monthly repayment on an average mortgage of 150,815 Euros over a 25-year term tracking at 0.5% above Euribor will cost 896 Euros this September, up from 805 a year ago. That's bad news for home owners. Earlier this month rising mortgage costs were linked to a slowdown in consumer spending in Spain.
Several things have fuelled the rise in rate, including a rise in the rate at which banks lend each other money as a result of the problems in the US financial market and the expectation that the European Central Bank will raise its base rate from 4% to 4.25% in September. (The ECB has since stated that it is not precommitted to the base rate rise, but that the rise may go ahead.)
If all this sounds like doom and gloom, it's worth remembering that even with the rate rise, European mortgages still have lower interest rates than British ones, as Bank of England base rate is still higher than Euribor.
