The mortgage market in Spain is undergoing significant changes, which many families are already feeling. Since the beginning of the year, banks have raised the average interest rate on new home loans to 2.75%, the highest level in recent years. This move is linked to the rise in the euríbor index and a shift in the lending policies of financial institutions, which are seeking to boost profitability after a period of price competition.
In February, according to Banco de España, the average rate on new mortgages continued to climb, reinforcing January’s trend. Banks have moved away from their former practice of offering loans at rates below euríbor and the yield of ten-year government bonds. Now, they are aiming to make up for the low returns of previous years, which is directly affecting borrowers’ wallets.
Market trends
The rise of euríbor to 2.56% in March became an additional pressure point on loan costs. This figure surpassed the February level and reached a peak for 2024. The reason lies not only in the decisions of the European Central Bank, which has kept its key rate at 2%, but also in geopolitical events. The escalation surrounding Iran, as well as actions by Israel and the USA, have heightened concerns about inflation and potential further rate hikes.
Despite rising borrowing costs, the total volume of mortgages issued in January–February grew by 2.1% compared to the same period last year. However, growth rates have slowed significantly: a year ago, this figure was ten times higher. The increase in new loan amounts is partly due to rising property prices, which are forcing borrowers to take out larger loans.
Changes in bank policy
Banks in Spain have officially ended the ‘price war’ period and have shifted to a strategy of raising interest rates. This decision is driven by a desire to move away from issuing loans with minimal margins, and sometimes even below market benchmarks. Now, financial institutions aim to increase profitability, making mortgages less accessible to new buyers.
According to russpain.com, the total volume of active mortgages has reached nearly 520 billion euros, 20 billion more than a year ago. However, experts note that further tightening of lending terms may reduce the number of deals and increase social tensions in the housing market.
Expectations and forecasts
The VII Asufin Barometer highlights two key trends expected to shape the market in the coming months. First, population growth will continue pushing property prices up, reducing the likelihood of any decline. Second, banks are already preparing new restrictions in anticipation of potential rate hikes. This could make mortgages even less affordable for most families.
Trioteca CEO Ricard Garriga urges caution: the future movement of the euríbor will depend on the development of the conflict in Iran and possible agreements between the US and Iran. In the coming weeks, the index may remain at 3%, keeping loan interest rates high.
New restrictions are being prepared
In its latest economic report, Banco de España notes that further tightening of mortgage conditions is expected in the first quarter of 2026. The regulator is considering introducing lending limits to prevent another property market bubble. Spain and Italy remain the only major European countries where such measures have not yet been implemented.
The International Monetary Fund also recommends that Spanish authorities introduce restrictions to protect the banking sector from risks related to high loan-to-value ratios. This is especially relevant amid signs of weakening lending standards.
In recent years, Spain has already experienced the consequences of sharp changes in the mortgage market. After the 2008 financial crisis, many families were unable to repay loans, resulting in widespread loss of housing. There was a brief period of lower rates from 2023 to 2025, but since 2026 the situation is again turning against borrowers. Analysts note that stricter conditions and rising rates may lead to fewer transactions and higher demand for rentals.
