The granting of mortgages accumulated four consecutive months of falls in May, and suffered a decline of 24%, the largest in two years, according to data published this morning by the INE, due to the rise in interest rates and the darkening of the economic outlook that has led banks to look closely at who grants a mortgage. The fall was especially harsh in the large real estate markets in Spain, where apartment prices are higher, and exceeded 30% in five autonomous communities: Canarias, Galicia, Illes Balears, Madrid and Catalunya.
As published by the National Institute of Statistics, in May banks granted 33,398 mortgages on homes, 24% less than last year, and the biggest drop since January 2021, which extends the cumulative drop in the first five months of the year to 11.9%. The average amount, for its part, was 141,798 euros, 4.6% lower.
Since September 2022, only last January the number of mortgages granted increased, although in the interannual rate it was a modest 2.9% increase and in the following months the fall has been accelerating: from 2% in February, it went to 15.7% in March and 18.3% in April.
In May, the group of financial institutions lent 4,735.8 million to buy a home, with an even greater annual decrease of 27.5%, since banks not only discard thousands of applications, but also reduce the amounts they lend to keep the installments below 35% of the applicants’ family income.
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 of the mortgages signed in February 2022, the rates have become more expensive by 79%. By type of credit, the average interest rate at the start of variable-rate mortgages was 2.79% and 3.40% for fixed-rate mortgages.
The higher cost of fixed-rate mortgages is causing them to lose market share, and in May they accounted for 62.0% of loans, compared to 75.4% reached in July of last year. 38% of the loans were already at a variable rate in May, a category in which the INE includes mixed mortgages (with the first years of fixed payment).
The communities with the highest number of mortgages on homes were Andalucía (7,111), Catalunya (5,759) and the Community of Madrid (5,078), although it is the latter that leads the ranking by capital lent, with 1,080.8 million euros, followed by Catalonia, with 922.8 million.
The granting of mortgages fell in all communities except Cantabria (with an increase of 6.5%), and the capital lent by banks also fell across the board, except in the communities of Asturias (11.8%) and Cantabria (7.2%).
The greatest falls in the number of mortgages granted were in the Canary Islands (–42.4%), Galicia (–36.0%), Illes Balears (–34.3%), Madrid (-31.1%) and Catalonia (-30.6%). According to analysts, it is the great drop in loans granted in these markets, where housing prices are higher, which is dragging down the total capital lent by banks as well as the average amount of loans granted.
According to María Matos, director of Studies at Fotocasa, the data confirms that the “mortgage boom” that accompanied the outbreak of sales after the pandemic has ended, but highlighted the strength of the market, since “the fair thing to do in the analysis would be to compare the figures for 2023 with those of 2019, before the pandemic” and the rate hike, which in Europe began in September of last year, and “they are only -1.2% lower.”
Matas recalled that in May the Euribor already reached 3.862% (today it is 4.121%) and that the prospect of further rate hikes by the ECB could take it to 4.5% at the end of the year. “In a scenario in which the Euribor increases daily, 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 face a possible increase in the cost of the fee in the future”.
Citizens’ concern about the rise in the Euribor is also reflected in the novation data presented by the INE: the percentage of fixed-interest mortgages increases from 13.4% to 37.4%, while that of variable-interest mortgages decreases from 85.6% to 61.3%.
