If you have, or are thinking about taking out, a variable-rate mortgage, sooner or later you'll run into Euribor. It is by far the most widely used reference rate in Spain for this type of loan, and understanding how it works helps you anticipate how your monthly payment might evolve.
What Euribor actually is
Euribor (Euro Interbank Offered Rate) is the interest rate at which a group of major European banks lend to each other at different maturities. Although several maturities exist (one week, one month, three months, six months, twelve months), the one used almost universally as a reference for mortgages in Spain is the 12-month Euribor.
Its value isn't set directly by any central bank or government: it results from the average of the daily quotes reported by participating banks, and it fluctuates based on market expectations about interest rates, which are in turn heavily influenced by the monetary policy of the European Central Bank (ECB).
How Euribor translates into your payment
On a variable-rate mortgage, the payment is calculated using an interest rate that results from adding the current Euribor at the time of review to a fixed spread agreed with the bank (for example, "Euribor + 0.99%"). The spread doesn't change over the life of the loan (barring renegotiation), but Euribor does, so the payment is reviewed periodically, usually every 6 or 12 months as set out in the deed.
It's important to understand that the review isn't continuous: your payment doesn't change every time Euribor moves, only on the review dates set in your contract, using the Euribor value at that point (or, in many contracts, the average for the month before the review).
Fixed, variable, or mixed mortgages relative to Euribor
- Fixed-rate mortgage: the interest rate doesn't depend on Euribor at all; it stays the same throughout the life of the loan. It gives total certainty about your payment, in exchange for usually starting from a somewhat higher rate than a variable one at the time of signing.
- Variable-rate mortgage: tracks Euribor directly. It can end up cheaper during periods of low rates, but exposes the borrower to payment increases if Euribor rises.
- Mixed-rate mortgage: combines an initial fixed-rate period (usually between 3 and 10 years) with the rest of the term at a variable rate linked to Euribor.
Why Euribor rises and falls
Euribor tends to move in the same direction as the ECB's official interest rates, though it isn't identical to them: it anticipates ECB decisions based on market expectations. When the ECB raises rates to control inflation, Euribor usually rises too; when it cuts rates to stimulate the economy, Euribor tends to fall. That's why it's common to follow ECB monetary policy decisions as a leading indicator of where Euribor might move in the coming months.
How to prepare for Euribor increases
If you have a variable-rate mortgage, it's worth simulating how your payment would change under different Euribor scenarios before they happen, not after. This gives you time to assess whether switching to a mixed or fixed-rate mortgage makes sense, whether to make early principal repayments, or simply adjust your monthly budget with enough of a margin.
Simulate your payment under different scenarios
With our mortgage calculator you can enter different interest rates to see how your monthly payment, total cost, and amortization schedule would change depending on the rate scenario you want to simulate.