Homeowners with variable-rate mortgages in Spain are facing another rise in monthly repayments after the Euribor climbed for a third consecutive month.

The benchmark rate, which is used to calculate the majority of variable mortgages in Spain, ended May at an average of 2.804% – its highest level since September 2024.

The increase marks a sharp turnaround from the start of the year and comes amid growing expectations that the European Central Bank (ECB) will continue raising interest rates in an attempt to contain inflationary pressures linked to the conflict involving Iran and soaring energy prices.

Since February, the Euribor has risen by around 0.6 percentage points, bringing higher borrowing costs for thousands of households across Spain.

For homeowners coming up for their annual mortgage review, the impact could be significant.

A borrower with a €150,000 mortgage over 25 years, paying Euribor plus a 1% margin, could see monthly repayments increase by almost €60, adding roughly €720 a year to household costs.

For those with a €300,000 mortgage, the increase could be closer to €120 per month, or around €1,400 annually.

The latest rise has fuelled concerns that the worst may not be over.

Financial markets widely expect the ECB to raise interest rates again at its next meeting on June 11, potentially taking the deposit rate from 2% to 2.25%.

If that happens, analysts believe the Euribor could remain around current levels throughout the summer and may even rise above the 3% mark.

Recent hopes of a peace agreement involving Iran and the US have helped ease some pressure on financial markets, causing the Euribor to retreat slightly from recent highs near 2.9%.

However, experts do not expect it to return to the lower levels seen before tensions erupted in the Middle East.

Analysts at Ebury, the Santander-owned fintech company, believe the ECB is likely to proceed with another rate rise regardless of any short-term diplomatic breakthrough.

They argue the central bank wants to prevent higher energy costs from spreading through the wider economy and driving further inflation, particularly through wage growth.

According to Ebury, if oil prices remain above $90 per barrel for an extended period, a second ECB rate rise later this year becomes increasingly likely.

That scenario would keep mortgage costs elevated and could push the Euribor even higher.

On the other hand, a lasting peace agreement and the full reopening of key oil shipping routes could reduce pressure on inflation and eventually allow the benchmark rate to fall back.

Forecasts compiled by Spanish think tank Funcas suggest the Euribor will remain close to current levels for the rest of 2026, ending the year at around 2.8%.

A gradual easing is expected in 2027, although experts do not believe rates will return to pre-conflict levels any time soon.

Meanwhile, Spain’s government is exploring whether alternatives to the Euribor should be considered for variable-rate loans and mortgages.

The proposal forms part of a public consultation launched by the Ministry of Economy, which is examining banking transparency and consumer protection rules.