In July 2025, the European Central Bank kept the base interest rate at 2%. After a series of eight reductions, this decision sent a clear signal to the market: significant changes in loan costs are not expected in the coming years. Experts predict that this rate will remain at least until 2027.
Spanish banks have already begun to adapt to the new situation. The country’s largest financial institutions are operating under the assumption that borrowing costs will remain stable, and the likelihood of further rate cuts is minimal. This means that mortgage conditions are unlikely to become noticeably more favorable for borrowers in the near future.
An important market indicator remains the Euribor index, which is used to calculate rates on most mortgages in Spain. Currently, it is in the 2–2.1% range and, according to analysts, is close to its lowest level. This limits the potential for further reductions in monthly payments on variable-rate mortgages.
With interest rates stabilizing, banks have intensified their efforts to attract new clients. According to the Bank of Spain, the average annual interest rate on home loans dropped to 2.78% in June, the lowest level since October 2022. Some banks are increasing the issuance of new mortgages to strengthen their market positions, while others are focusing on alternative lines of business, given the high likelihood that current conditions will persist.
At the same time, experts note that a period of relative predictability is beginning for homebuyers and adjustable-rate mortgage holders. No significant changes in monthly payments are expected, and substantial discounts on new loans are unlikely in the coming months.
The ECB’s decisions are also influenced by the international economic situation. The bank’s leadership is acting cautiously due to external factors, including trade restrictions and geopolitical tensions. The next ECB meeting is scheduled for September 11, and most analysts are confident the rate will remain unchanged. However, further actions will depend on developments in global markets and the impact of new tariffs.
Overall, Spain’s mortgage market is entering a phase of stability. For borrowers, this means no sharp changes in lending conditions, while for banks it means they will need to seek new ways to attract clients amid high competition and limited potential for further rate cuts.
