The Euribor rose to 3.54% in July which means that overall interest rates have risen 1.37% in the space of a year.

It is predicted that mortgage rates will continue to increase given that the Euribor, on which mortgage rates are fixed, has seen its 10th consecutive rise and has reached its highest level since July 2002. It was just 2.168% at its lowest in July 2005.

The rise means that the average 20 year mortgage in Spain of 140.000 euros, which is due for its annual revision will increase 100 euros per month which works out at an extra 1200 euros a year. This increase is calculated on the basis of the Euribor base rate plus the percentage added by the bank. This is a worrying trend for mortgage holders given that property prices are already at an all time high.

For first time buyers the situation is even more serious as prices continue to go up, albeit at a slower rate that the past couple of years, making affordability less and less likely for this group of buyers.

Madrid, Barcelona, San Sebastian and Bilbao continue to be the most expensive cities in Spain although prices on the Mediterranean have also shot up in recent years.