Mortgage rates, approvals and customer confidence are all improving, prompting an injection of cash from the ECB.

Growing competition among Spanish banks, a recovering economy and a confident domestic market have convinced the European Central Bank (ECB) to boost Spain’s mortgage sector as the property market returns to strength…

The ECB’s injection of cash has helped to keep borrowing costs low, meaning rates are far more attractive today than they have been since 2012, when the last peak in mortgage lending was first recorded.

Data from the Bank of Spain has revealed that the average payment spread that banks are charging customers is now only 1.79% more than the 12-month Euribor rate – which is the European standard reference rate for mortgage payments that comprises around 90% of the country’s variable-rate loans.

This figure is demonstrating a downward trend, and has already reached the level it was at in January 2012. Should rates reach the same level as the Euribor, analysts believe that it will be a sure sign that Spain’s property market has secured its recovery after a couple of years of low sales and unattractive mortgages, not to mention a populace unwilling and unable to buy.

Today, this has all turned around. The volume of new mortgage approvals reached €4.2 billion in July this year, which was the highest figures since the end of 2012 – right before the Spanish government phased out a tax deduction for some customers, thus prompting a spike in activity. Looked at more widely, the current performance of the Spanish mortgage market is at its healthiest since before 2010, and competition throughout the lending landscape is hotting up.

This can only mean one thing – even more attractive mortgage rates for property buyers. According to Bloomberg, Santander is now offering a variable rate mortgage that is 1.25% above Euribor, while ING España can offer a rate of 0.99% above the Euribor benchmark.

Some economists have warned that as interest rates begin to rise, then some borrowers taking advantage of the current attractive rates may be storing up problems later. Rates are low currently, that is true, but the volumes at which buyers are borrowing pale into insignificance when compared to the numbers posted during the boom years of 2005-2007, so the property industry is not too concerned just yet.