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The Rise of Interest Rates and Its Impact on the Younger Generation: 41% Pay an Average of 300 Euros More on Their Mortgage Than a Year Ago

In the last year and a half, successive interest rate hikes by the European Central Bank (ECB) have triggered a parallel increase in the Euribor, the index to which most variable and mixed-rate mortgages in Spain are linked. Starting from the -0.5% with which the Euribor began in 2022, we have reached a level above 4% since June 2023. This scenario directly affects the budget of 20% of Spaniards who have a variable or mixed-rate mortgage.

According to the latest Fotocasa Research survey of over 5,000 people in August, 35% of variable or mixed-rate mortgage holders have experienced an increase of less than a hundred euros in their monthly installment in the last twelve months. Another 27% now pay between 100 and 199 euros more than a year ago, while 16% have seen an increase of between 200 and 299 euros. In line with the market landscape, where the average mortgage in Spain is around 140,000 euros in 2023 according to INE data, increases in mortgage payments exceeding 300 euros are less common: 8% up to 399 euros and 4% above 400 euros. A fortunate 7% state that their mortgage has not changed, while 4% are unaware of their situation.

In total, 89% of those with a variable or mixed-rate mortgage have seen the amount of their monthly payment increase in the last twelve months. This economic impact is not evenly distributed, especially concerning the age of mortgage holders. The data reveals that older age segments have experienced smaller increases. For example, among those over 55 with a variable or mixed-rate mortgage, 46% have not suffered an increase of more than 100 euros.

Conversely, 41% of those with mortgages between 18 and 24 years old with a fixed or mixed-rate mortgage now pay at least 300 euros more than a year ago, compared to 7% among those over 55. These differences are related to the number of installments pending and the credit amount, as a longer term and higher amount result in a greater increase in monthly payments. María Matos, director of studies and spokesperson for Fotocasa, comments: "Due to the most commonly used amortization system in mortgages, the first years are mainly devoted to interest payments, which affects younger people who are just beginning to face the mortgage. With the rise of the Euribor, those who took out variable-rate mortgages before 2022 could experience an increase of 48% in the last year. Furthermore, the youngest are the most affected due to their lower incomes and vulnerability to changes in monetary policy."

Approximately three out of ten people over 18 years old in Spain (31%) have a mortgage, according to Fotocasa Research data. This percentage is slightly higher than the one recorded in February 2023 (30%). Although variable-rate mortgages remain the most common (18%), fixed-rate mortgages maintain their presence at 12%, with a rising trend. 2% have a mixed-rate mortgage, a modality that has experienced a 1% increase since the February 2023 survey."