Increases in Euribor and potential impact on mortgages and the Spanish economy

Increases in Euribor and potential impact on mortgages and the Spanish economy

Fecha: marzo 2023

Raymond Torres

Mortgage market

SEFO, Spanish and International Economic & Financial Outlook, V. 12 N.º 2 (March 2023)

The impact of the rise in Euribor on mortgage payments depends primarily on households’ outstanding principal. Although the average size of a new mortgage stands at close to 145,000 euros, the average balance on outstanding mortgages is lower, at 82,700 euros. Circumstances therefore vary significantly depending on the age of the loan, just as a household’s vulnerability depends on its income levels. Overall, the rise in Euribor has cooled the housing market –transaction volumes have slowed and the price curve is beginning to bend. For now, however, the situation cannot be said to pose a major recessionary risk to the Spanish economy. Longer-term, the key will lie with the trend in employment, the main determinant of households’ ability to service their debts. Nevertheless, households that have taken out floating-rate mortgages more recently with low- or medium-low income levels are set to face a sharp increase in financial burden relative to their disposable income, highlighting the importance of policy measures targeted at those most at-risk.

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