Spanish Mortgage Rates
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Spanish Mortgage Rates

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Thursday, 23 Oct 2008

Spanish Mortgage Reference rates

The reference rate is the variable on which the adjustments to a loan's interest rate are based. In 1994, 6 official reference rates were established. In June 1999, the 1-year Euribor was added to the list.

The current official rates are as follows:

1-year Euro Interbank Offered Rate (1-year Euribor) This is the rate at which one-year interbank term deposits in the euro zone are offered by one prime bank to another. It represents the monthly average of the daily values of this rate.
Savings Bank IRPH (Mortgage Loan Reference Rate) This is the average rate for mortgage loans with terms of over 3 years granted by savings banks for the purchase of free-market homes.
Commercial Bank IRPH (Mortgage Loan Reference Rate) This is the average rate for mortgage loans with terms of over 3 years granted by commercial banks for the purchase of free-market homes.
Joint Credit Institution IRPH (Mortgage Loan Reference Rate) This is the average rate for mortgage loans with terms of more than 3 years granted by all credit institutions for the purchase of free-market homes.
Spanish Federation of Savings Banks (CECA) Reference Rate This is the average rate for personal loans with terms of at least 1 year but less than 3 and for mortgage loans with terms of 3 years or more granted for the purchase of freemarket homes.
Rate of return on public debt instruments with maturities of between 2 and 6 years This is the internal rate of return on the secondary market for public debt instruments with maturities of between 2 and 6 years.

Spain Mortgage Rates

All of the official rates meet the following basic requirements for mortgage loan reference rates:

They are public and easily verified by the customer. The Bank of Spain publishes these rates each month in the Official State Gazette (each one is assigned a single value per month), and they can be easily checked in the financial pages of daily newspapers.
They are objective. The data used to calculate the rates' values at any given time are aggregated pursuant to mathematical procedures approved by the Bank of Spain.
They are neutral. No financial institution can influence their calculation. Regardless of whether or not an official reference rate is used, both the agreed rate and how it will be applied must be clearly stated in the mortgage deed.

With adjustable rates, don't forget to ask -

Which reference rate will be used (Euribor, Savings Bank IRPH, etc.).
How the new rate will be established at each adjustment.
How the new rate and the period for which it will remain in force will be communicated to the customer at each adjustment.
What is involved in cancellation of the agreement, should the customer decide not to accept the new rate to be applied over the following interest period.

Information on Variable Rate Mortgages in Spain.