If you’re an Australian thinking about buying property overseas, you might be surprised to learn that some of the cheapest mortgage rates in Europe are lower than what you’d find back home.
European Mortgage Rates at a Glance
There’s no single “European” mortgage rate because it differs by country. The average mortgage interest rate across the euro area is roughly 3.30%. But individual countries deviate a lot from that average.
To put these numbers in perspective, let’s compare them to Australia. The Reserve Bank of Australia’s cash rate climbed rapidly in 2022-2023, which pushed Australian mortgage rates to 5.84% in May 2025. So an interest rate around 3% – like you might get in Spain or France – sounds like a real bargain by comparison.
So, where specifically can an Australian find the cheapest mortgage rates in Europe?
Spain
Based on the latest available data in July 2025, Spanish banks are offering home loans around 2.98%, the lowest in the Eurozone. In fact, Spain’s rates are about 0.4% below the Euro area average, which is a dramatic reversal from a few years ago.
The European Central Bank’s rate hikes actually hit Spain less hard than elsewhere, and as the ECB began easing off, Spanish banks have been racing to undercut each other and attract borrowers. So that gap – roughly half a percent – is significant for anyone taking out a large loan.
For foreign buyers, Spain is particularly welcoming. Non-resident investors (such as Australians) can access local mortgages fairly easily, which is part of Spain’s appeal. You will need a decent down payment, though – typically around 30% or more of the purchase price. But beyond that, Spanish banks are open to lending if you meet their criteria.
France
France is another European country with impressively low mortgage rates, roughly 3.11% (excluding renegotiations) on average for new borrowers in May 2025. That places French mortgages among the cheapest in Europe, only slightly above Spain’s offerings!
French banks are usually known for their conservative lending (they have strict debt-to-income limits that are often around 35% maximum) and require borrowers to carry life insurance on the mortgage.
So these practices keep default rates low and is how French lenders can offer attractive terms like this. The result is that even international buyers can secure a good deal, provided they meet the qualifications.
There are even government-supported programs (like the Prêt à taux zéro, a zero-interest loan scheme for first-time buyers).
They’re a notch above Spain’s, but below places like Germany (about 3.6%). So if you’re comparing financing costs across borders, France is definitely a solid choice.
Just be prepared for meticulous paperwork in France and potentially slower loan approval times – the process can feel a bit bureaucratic, but those low interest rates are worth the wait.
Portugal
Portugal averages around 3.3%. So just a tad bit higher than France or Spain. That said, property prices in Portugal are traditionally a lot lower than in many Western European nations, so your loan can actually stretch further in terms of what you can buy.
And getting a mortgage in Portugal is quite feasible. Like Spain, expect to put about 30% down, but interest rates and terms are still fairly competitive.
Keep in mind, though, with inflation and global rate trends, nothing is exactly static – Euribor (the Euro Interbank Offered Rate) can also fluctuate, which affects adjustable-rate mortgages.
That said, inflation looks to be trending down in Europe in 2025, so there’s some optimism that rates will remain affordable or even dip.
Italy
Italy offers mortgages at roughly 3.18% interest, which is very much in line with France and Portugal.
Banks here usually provide both fixed and variable rate options, and like elsewhere in Europe, long-term fixed rates are fairly popular (which gives you more stability in your payments).
Italy’s rates being this low is mainly because of its economic growth and the influence of ECB policy over the years – Italian banks can borrow quite cheaply from European markets and pass that on to customers. They also face competition, especially in the north where a lot of other European lenders operate.
One interesting aspect is that Italy’s mortgage market caters well to niche buyers, like anyone who’s interested in renovation projects. There are products geared toward restoring historical homes, for example, which can come with favorable terms.
As a foreign buyer, you will find Italian banks open to lending, but expect them to scrutinize your income and credit history thoroughly (perhaps even more so if you’re self-employed or have non-Italian income).
You’ll likely need around 30-40% down for a non-resident mortgage here as well, similar to Spain and Portugal. Italy might not beat Spain in having the absolute lowest rate, but the difference is obviously tiny – only about 0.2 percentage points higher than Spain.
In practice, that’s really only a negligible gap on any typical loan. So, if Italy is where you’d love to own property, its financing cost shouldn’t stop you!
The United Kingdom
No discussion of European mortgages would be complete without the United Kingdom, given how common a target it is for Australian expats and investors.
British mortgage rates have historically been low, but recently they’ve climbed higher than the Eurozone’s. The Bank of England reacted to high inflation by just raising its base rate sharply from 2022 onward, so that only pushed UK home loan rates up.
As of mid-2025, average fixed mortgage rates in the UK are about 5.05% for well-qualified buyers with sizable deposits. You can clearly see that’s well above the ~3% club of Spain and France – some of the highest mortgage rates in Europe.
Some UK borrowers on variable rates have faced even higher costs; the average standard variable rate (SVR) is over 7.48%, which is just insane compared to the rest of the continent.
So, if considering London or another UK city, definitely keep in mind that financing there may not be as “cheap” as in other European countries.
Why the higher rates? In part because UK inflation was stubborn, which led to a higher base interest rate than the ECB’s for a time. Also, UK lenders price in different risks and often shorter fixed-rate periods (2 or 5 years are common), so repricing risk is higher.
The good news is that by mid-2025, this trend has been reversing slightly. Even that 7.48% figure for the average standard variable rate is down from 8.18% a year ago. The Bank of England paused hikes and even cut rates slightly as inflation began easing.
So mortgage lenders in turn have begun trimming their rates – you’ll see news of major banks like Nationwide and Halifax announcing small rate reductions on new loans. This means the peak might be over, and if you’re patient or able to lock in a deal soon, you might catch the UK on a downswing in rates.
Still, for now, the UK doesn’t offer the cheapest mortgage rates in Europe by a long shot. It obviously remains as one of the most attractive property markets for many reasons (strong rental demand, familiarity, no currency exchange if you have GBP income, etc.), but purely on financing cost, the Eurozone has an edge.
How Upscore Can Help
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