Interest rate trends 2025-2026
Rates have been falling for two years after the most aggressive hiking cycle in decades. Banks frame this as good news for you. The reality is finer: rates drop, but banks adjust margins, pile on add-on products, and keep a slice of the benefit. What reaches your mortgage is not the same as what falls at the ECB.
What happened
The quick summary:
- 2022-2023: The ECB raised official rates from 0% to 4.5% to tame inflation. The Euribor went from -0.5% to nearly 4%. Fixed mortgage rates shot up to 3-4%.
- June 2024: The ECB started cutting. First signal of a turn.
- 2025: Continued cuts. The ECB deposit facility rate fell to around 2%. The Euribor closed 2025 near 2.5%.
- Early 2026: Rates stabilising. The market is debating whether more cuts are coming or whether we have reached the bottom of the cycle.
Where we are now
As of early 2026:
- ECB official rate (deposit facility): around 2%.
- 12-month Euribor: approximately 2-2.5%.
- Competitive fixed-rate mortgages: 1.7-2.2% with add-on products (vinculaciones).
- Variable-rate mortgages: Euribor + 0.30% to + 0.70%.
- Mixed-rate mortgages: 1.4-1.8% for the initial fixed period, then Euribor + 0.30-1.00%.
As one forum user noted: "Fixed at 1.8% with no add-ons hasn't been available since 2021-2022." The best offers go to high-income profiles with full insurance and product bundles. The rate you see in the advert is not the rate you sign.
What the ECB says
The ECB's official stance: inflation is moderating toward its 2% target, the European economy remains weak, and the central bank wants to bring rates to a "neutral" level — which most analysts place between 1.5% and 2%.
From the latest press conference captured in the forums: "The economy remains weak, but leading indicators point to a gradual recovery. The moderation of inflation continues."
What could go wrong
Several factors could slow or reverse the rate decline:
Persistent inflation. If core inflation stays above 2.5%, the ECB has little room to keep cutting. In 2025, core inflation readings created uncertainty at several points.
US-Europe trade war. Tariffs can raise import costs and generate imported inflation. As one user noted: "Banks won't touch their mortgage rates, and the ECB — I don't know if it will cut if the Fed doesn't."
Oil and energy. A conflict affecting oil supply could spike energy prices and feed through to inflation.
The US Federal Reserve. If the US keeps rates high, the ECB has less room to cut without weakening the euro. As someone explained: "The ECB and the Fed both run monetary policy. Europe isn't growing and needs lower inflation. The US is growing and needs to avoid a hard landing."
Is there room for more cuts?
Market consensus in early 2026: some room remains, but not much. Some analysts suggest the ECB could reach 1.5% if the economy stays weak. Others believe we have already hit the cycle floor.
As one community member summarised, citing market data: "It seems like this cycle has already bottomed, and markets estimate only about a 30% probability of an additional cut in 2026."
What this means for your mortgage
If you are shopping for a mortgage, the most pragmatic advice: do not try to time the market. The best conditions in years are available now. If you find a fixed rate below 2% or a mixed-rate with a competitive initial period, that is a good deal under any reasonable scenario.
If you already have a variable mortgage with a low spread (Euribor + 0.30-0.60%), you are probably better off staying put. If your spread is high (Euribor + 1% or more), this is a good time to switch lenders (subrogar) or renegotiate with your bank (novacion). The bank will not call you to offer better terms. You have to go to them.
Disclaimer: This guide reflects the situation as of early 2026. ECB decisions and market conditions change. Check current data before acting.