Euribor vs. Inflation: When Debt is Your Ally

The natural instinct of the Spanish saver is: "I have debt, I must eliminate it". It is a mindset inherited from our parents. But in the current economic environment, that mindset can cost you money.

The Problem: The Real Interest Rate

Euribor is high, yes. But Inflation has also been high.

When inflation is high, the value of money decreases. This means that the €1,000 you pay in installments today is worth less (in terms of purchasing power) than the €1,000 you paid 5 years ago.

If your salary adjusts with inflation (or close to it), your debt is getting "smaller" on its own, in real terms.

The Agitation: The Opportunity Cost

If you run to pay a mortgage that costs you 3% interest, while inflation is 4% or 5%, you are making a financial mistake.

You are using "expensive" money (yours, liquid) to pay "cheap" debt (devalued by inflation).

Also, if you use all your savings to amortize, you lose liquidity. If rates go up even more tomorrow or you lose your job, the bank will not return that amortized money for you to pay the supermarket.

The Solution: The "Arbitrage" Strategy

As Analysts, we recommend looking at the Spread.

1. Look at the APR of your mortgage (e.g., 3.5%).
2. Look at the safe profitability you can get for your money (Treasury Bills, Deposits, Remunerated Accounts).

If you can get 3.0% or 3.5% in a remunerated account with immediate availability, DO NOT AMORTIZE.

Why? Because you maintain liquidity. The financial benefit of amortizing (saving 3.5%) and investing (earning 3.5%) is identical, but investment gives you freedom and security. Amortization leaves you with bricks but no cash.

📱 The Simulation on Amorti

Use AmortiApp to find your "Break-Even Point".

1. Simulate an amortization of €20,000.
2. Note the "Total Interest Savings". Divide it by the remaining years to see the approximate "annualized return".
3. Compare that with what a 3% Compound Deposit would give you.

If the numbers are close, always choose liquidity. Amortize only when the mortgage interest is clearly higher than the safe investment.

Do not decapitalize yourself blindly. Calculate first.

Compare Amortization vs Investment