Mortgage rates in Spain will go up as the benchmark rate for home loans posted its first annual gain in two years.

The 12-month Eribor rose to 1.42% in August, up from 1.33% the same month last year. This means that repayments on the average mortgage in Madrid of 171,000 euros could go up by 7 euros per month. There's a possibility that Euribor may rise to 2% nextyear, which would mean an additional 50 euros to the average monthly mortgage payment.

Along with the higher mortgage payments, the country is also struggling to deal with higher sales taxes and a unemployment rate that already tops 20%. The IMF forecasts that the Spanish economy will contract by 0.4% this year.

Repossession cases have increased to 27,621 in Q1 2010, up from 23,433 in the same quarter last year.

Source: Bloomberg