Is there a bigger issue right now for many people in the UK than rising mortgage rates?
In the 13th consecutive rise since December 2021, the base rate as set by the Bank of England has this week been increased to 5%. This is bad news for the 1.4m people on variable rate mortgages, and for new borrowers: the average two-year fixed-rate mortgage last week hit 6.15%, while five-year deals were 5.79%.
But there is some good news for anyone planning on buying in Spain. The rate there has increased but it not quite so hefty. The European Central Bank (ECB) also increased their main (deposit) rate by 0.5% rate to 3.5%. This increase on 15th June was the eight consecutive increase.
According to Kevin Monger of Mortgage Direct, partner of A Place in the Sun Mortgages, for a UK borrow a typical mortgage rate in Spain is around 3.75% fixed for 20 years. But it is likely to increase by as much as 0.5% in the coming weeks.
So what has been the impact on buyers in Spain?
Anecdotally, some agents are reporting that they have seen an uptick in buyers taking out a small mortgage because, as the UK economy remains unpredictable, and they might indeed face higher monthly expenses on their British home over coming months, they don’t want to ‘tie up all their cash’ in their new Spanish home.
Some buyers are also increasingly looking to rent out their home for a few weeks a year so such income might cover such a mortgage.
Kevin Monger agrees that his company has seen some UK buyers request a small mortgage in LTV terms when they might otherwise have been cash buyers. “Relatively few clients have pulled out of purchases due to rate increases,” he adds.
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“Our data shows the number of enquiries from UK nationals are at a similar level to last year, but more clients are signing up for our service. Rates in Spain still low for foreign buyers compared to other countries.” Indeed, in France, Portugal and Italy it is 4 per cent at the time of writing.
If you are thinking of transferring money to Spain, learn about how to save money on foreign currency exchange.
