What is Euribor and how it affects your mortgage

Euribor (Euro Interbank Offered Rate) is a reference interest rate: it reflects the rate at which the large European banks lend to one another. It is published for several maturities, and the 12-month one is the usual choice in Spanish mortgages.

Important: Euribor is not the rate you pay. It is only the reference index the rate is built on.

How it is applied to a variable mortgage

The rate on your mortgage is:

rate = Euribor + spread

The spread (diferencial) is the margin the bank adds to the index and is fixed in the contract. Euribor, on the other hand, is updated at each review, normally once a year (in some contracts every six months). Between reviews the rate and the payment do not change.

If your contract has a Euribor of 2.5% and a spread of 0.75%, the applicable rate is 3.25%.

How much the payment can change

The effect of one point looks small, but on a long loan it shows. With a loan of €150,000 over 25 years:

One more point means €80.44 more a month, about €965 a year. In the other direction, if the index falls, the payment falls in the same way.

What to check in your contract

• The index and its maturity: which reference is used and how its value is taken for the review.
• The spread: the margin is what you really negotiate with the bank.
• How often it is reviewed: annually or every six months.
• Limits on the change: some contracts set a minimum or a maximum for the applicable rate.

You can find information on the mortgage market and your rights in the Bank of Spain's Portal del Cliente Bancario (available in Spanish).

Try the effect in the mortgage calculator: choose a variable rate and change the "future Euribor" to see how the payment moves from the second year.

Note: this guide does not forecast Euribor. The values are illustrative.

For guidance only: this is not financial or legal advice. Always check with your lender before deciding. Methodology.