The conflict in Iran freezes the mortgage war and threatens to make home loans more expensive

The crisis in the Middle East, with attacks on Iran and the response of what remains of the Iranian regime in the area, has revived fears of a repeat of the economic and financial episode that occurred with the Russian invasion of Ukraine, uncertainty against growth and inflation. There have already been significant increases in oil and gas prices, and the Euribor has risen in recent days. Banks are reviewing offers and evaluating their policies, which puts the continuation of the mortgage war seen last year and in early 2026 in check, which according to some bankers is being waged at "irrational prices. "

In just one week, the Euribor has risen 10 basis points to 2.3%. More striking is the evolution of the three-month Euribor future, which is used as a benchmark for market expectations in the medium and long term. The forecast for the end of the year has gone from less than 2% to close to 2.5%. For December 2027, it points to 2.6%, and 2.7% in 2028. That is half a percentage point more in each case, in just one week. The risk is that this will continue in the coming days. This half a percentage point could increase the cost of a 30-year fixed-rate mortgage of E200,000 signed now from 2% (achievable until this week with ties) to 2.5%, amounting to E20,000 in interest over the life of the loan.

In addition, banks have taken a stock market hit that reminds them that there is a lot of uncertainty in the market. It should be noted that, in the medium term, rate hikes increase the value of banks' loan portfolios and boost profits, as has been the case in recent years, but there may also be negative effects due to lower demand for financing and insurance or funds, higher default rates, and a blow to debt investment (ALCO portfolios). The Ibex 35 Banks index, with its six listed entities, fell 7% in the five sessions following the attack on Iran, in what was the worst week for the Ibex as a whole since 2021. Oil rose 23% to nearly $90, and natural gas shot up 65%.

The market is already anticipating a rise in inflation due to the transmission of higher oil and natural gas prices. This is also due to the potential impact on world trade of the de facto closure of the Strait of Hormuz and the insecurity of navigating other routes in the area. After that, there could be second-round effects. It is still too early to gauge whether this conflict will become entrenched and even intensify, as happened in Ukraine, and whether it will have the same impact on inflation and interest rates. In 2022, the CPI reached 10% in Spain, while the one-year Euribor, which is the direct reference for most variable-rate mortgages and an indirect reference for bank financing offers, exceeded 4% in 2023 due to interest rate hikes by the European Central Bank (ECB).

, which is the offer that binds the bank for 30 days.

At the banks' headquarters, management committees are monitoring the situation. Banking sources indicate that there are still no clear guidelines for the branch network on rate increases, but there are transactions that are being reviewed more cautiously if they are in the early stages and still have to be validated by the risk departments. Some approvals are being delayed and there have been upward revisions in specific cases. In fact, several institutions are planning to review their commercial policy on Monday at mortgage price monitoring committee meetings.

The crisis in the Middle East comes at a time when banks were already analyzing the mortgage war and raising prices, although not across the board. Between the end of 2024 and the beginning of 2026, there has been a scenario in which both the Euribor and future rate expectations were anchored at around 2%, with macro growth, strong demand, and many banks eager to gain market share.

Entities such as CaixaBank, Sabadell, Ibercaja, Kutxabank, Abanca, Unicaja, and rural savings banks have been aggressive with offers below the Euribor at a fixed rate for 30 years, with prices around 2% or even lower for some profiles. With the 30-year swap, a derivative used as a benchmark for long periods, above 3%, these are "irrational prices," according to the CEOs of Santander, BBVA, and Bankinter in recent months. For their part, the most aggressive banks in mortgages argue that they cover costs and have the capacity to make the portfolio profitable through cross-selling of products such as insurance, funds, or future loans.

However, some bankers had already cast doubt on whether this mortgage war would continue. Or, at least, that there would not be a small price rebound in 2026 and that some institutions would exit the market. César González-Bueno, outgoing CEO of Sabadell, pointed out in February that in 2024 they gained market share, in 2025 they remained stable, and that they may lose market share in 2026, in a market that "has grown more than is sustainable in the long term."

"Each institution must know at what price transactions are made. Things are being pushed to the limit. But not all banks are in the same circumstances. Competition is generated by the institutions, which make all the mortgages, and as they have liquidity and surplus capital, they want to win customers. It is a tool for winning business. There is more competition, and a limit is reached where an institution may say that it is not interested in continuing. But each institution has a different limit," said Gonzalo Gortázar, CEO of CaixaBank, on January 30, implying that this year offers are likely to worsen and commercial aggressiveness will be less.

In fact, the Bank of Spain and the ECB are preparing a supervisory framework to monitor the method of granting mortgages, both in terms of risk analysis and pricing.

All these ingredients already pointed to a less aggressive mortgage war this year. Now, banks have to review their strategies amid uncertainty about growth, which affects the credit quality of households, and the potential impact on inflation. The conflict in the Middle East could have ended the price war in the mortgage market.

The crisis in the Middle East, with the attacks on Iran and the response of what remains of the Iranian regime in the area, has revived fears of a repeat of the economic and financial episode that occurred with the Russian invasion of Ukraine, uncertainty about growth and inflation. There are already significant increases in oil and gas prices, and the Euribor has risen in recent days. Banks are reviewing offers and evaluating their policies, which puts the continuation of the mortgage war seen last year and in early 2026 in check, which according to some bankers is being waged at "irrational prices. "