(Bloomberg) -- Spain’s economy minister isn’t taking any chances when it comes to the European Central Bank and the cost of his mortgage.
Roman Escolano admitted on Friday he’s in the process of arranging a fixed-rate loan to lock in cheap borrowing costs while they last.
“I would call for caution and prudence in awarding floating-rate mortgages, taking into account that we are at historic low levels,” Escolano said in a radio interview with RNE. With rates where they are, the only way is up, he added.
In Spain, a nation of property owners, most mortgages are floating-rate and pegged to the 12-month euro interbank offered rate known as Euribor. The European Central Bank’s loose monetary policy has sent the rate, which topped 5 percent a decade ago, below zero, saving home owners hundreds of euros on their monthly mortgage repayments.
With the ECB expected to scale back stimulus later this year and increase rates in 2019, would-be buyers can no longer count on such cheap terms for repaying their home loans.
Spanish families still owe about 500 billion euros ($598 billion) in outstanding mortgages -- the legacy of a housing bubble that burst in 2008, plunging the country into a financial crisis that forced the government to seek a European banking bailout. While there’s no sign of a housing boom now, the prospect of higher borrowing costs means house buyers should take care, said Escolano.
“This is one of the most important decisions that anyone makes in their life from a financial point of view,” said Escolano. “It’s a decision that affects you for many years and precisely for that reason I would urge caution.”
©2018 Bloomberg L.P.
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