The granting of mortgages accumulated four consecutive months of falls in May and suffered a 24% setback, the largest in two years, according to the INE, due to the rise in interest rates and the darkening of the economic outlook that has led banks to restrict credit. The fall was particularly severe in the large real estate markets and exceeded 30% in the Canary Islands, Galicia, the Balearic Islands, Madrid and Catalonia.
According to the National Institute of Statistics, in May banks granted 33,398 mortgages on homes, for an average amount of 141,798 euros, 4.6% lower.
In the first five months of the year, the cumulative drop in mortgages is already 11.9%. Since September 2022, when rates began to rise, only last January did the number of mortgages granted rise, although at an annual rate it was a modest 2.9% increase. In the following months, the fall accelerated: from 2% in February, it went to 15.7% in March and 18.3% in April. In May, all financial institutions lent 4,735.8 million for housing, with a more marked annual decrease of 27.5%.
In May, the average interest rate on home mortgages was 3.15%, the highest rate since April 2017, and the average loan term was 25 years. From 1.76%, which was the average rate for mortgages signed in February 2022, rates have risen by 79%. The average initial interest rate for variable rate mortgages was 2.79% and 3.40% for fixed rate mortgages.
The high cost of fixed-rate mortgages is causing them to lose market share, and in May they accounted for 62% of loans, compared to the 75.4% they reached in July 2022. In May, 38% of loans were already at variable rates, a category in which the INE includes mixed mortgages (with the first years of fixed rates), which according to operator Clickalia accounted for 25% of its operations in the first semester.
The communities with the most mortgages established on homes were Andalusia (7,111), Catalonia (5,759) and the Community of Madrid (5,078), but the latter is the one that leads the ranking for borrowed capital, with 1,080.8 million euros, followed by Catalonia, with 922.8 million.
The granting of mortgages fell in all the communities except Cantabria (with a rise of 6.5%), and the capital lent by the banks also fell in a general way, except for the communities of Asturias (11.8%) and Cantabria (7.2%).
The most pronounced falls in the number of mortgages granted were in the Canary Islands (42.4%), Galicia (36.0%), the Balearic Islands (34.3%), Madrid (31.1%) and Catalonia (30.6%). According to the experts of the Idealista portal, it is the great drop in loans granted in these markets, where the price of housing is higher, that drags down the total capital loaned, and also the average amount of loans granted.
According to María Matos, Fotocasa director of studies, the data confirm that “the mortgage boom” that accompanied the buying and selling frenzy after the pandemic is over, but highlighted the strength of the market, since “what would be fair in the analysis would be to compare the figures for 2023 with those for 2019, before the pandemic” and the rise in interest rates, which in Europe began in September of last year , and “are only 1.2% lower”.
Matas recalled that in May the E uribor already reached 3.862% (yesterday it was 4.121%) and that the prospect of further rate hikes by the ECB may take it to 4.5% at the end of the year. “In a scenario where E uribor increases daily, and above 4%, it is not surprising that most mortgages continue to be signed at a fixed rate. Many families prefer to close a mortgage at a fixed rate than to face a possible price increase”.
Citizens’ concern about the escalation of E uribor is also reflected in the data on innovations presented by the INE: the percentage of fixed-interest mortgages increased from 13.4% to 37.4%, while that of variable mortgages decreased from 85.6% to 61.3%.
