The rise in interest rates, at six-year highs, and the darkening of the economic outlook have put the brakes on the granting of mortgages: according to INE data, in March banks granted 36,182 mortgages on homes , 15.7% less than last year, with an average amount of 142,663 euros, 1.5% less.
The fall in March deepens the shutdown of the mortgage market in February, in which credits fell by 2% and broke a streak of 21 consecutive months of year-on-year increases. According to the data published yesterday by the INE, the total capital lent by the bank amounted to 5,161 million euros, with an even higher year-on-year drop of 17%.
According to MarÃa Matos, director of studies at Fotocasa, the fall in credits in March confirms that the real estate market is slowing down, but gradually, since “this is the second official decline caused by the change in monetary policy and comes eight months after the first rate hike”. In his opinion, “exceeding the 35,000 mortgages brings us back to normal compared to the pre-pandemic levels of 2019. They remain very positive data that indicate that the mortgage market remains strong and stable”.
In the same sense, Javier Torres, head of mortgages at Clikalia, pointed out that these are positive data, because they confirm that the rate hike “is managing to cool the market in order to avoid major problems without significantly affecting real estate activity” .
In March, fixed-rate mortgages continued to lead the market, with 63.9% of all loans granted, but variables gained weight again and accounted for 36.1% of total loans, partly due to rise of mixed mortgages, which guarantee a fixed interest rate during the first years and which the INE includes among the variables.
Since July 2022, when fixed mortgages reached 75.4% of the market, this type of credit has been losing weight and experts predict that in the coming months, so the European Central Bank will continue its rate hike process , variable rate credits will be more numerous again, as they had always been in the Spanish market until March 2020.
“The strategy of financial institutions to make variable mortgages cheaper and fix fixed ones is already having results. Those of these months will practically be the last credits signed at a fixed rate and it is expected that there will be an even more marked change in the trend”, assured Matos.
In March, the average interest rate on home mortgages was 2.99%, 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 70%. By type of loan, the average interest rate at the start was 2.72% for variable-rate home mortgages and 3.15% for fixed-rate mortgages.
For autonomous communities, the fall in registered mortgages has been widespread, and only in Asturias did they rise, by a slight 0.8%. After the Principality, the smallest declines occurred in the Canary Islands (-5.6%) and the Valencian Community (-6.3%). At the other extreme, the communities that presented the biggest declines were the Balearic Islands (-31.0%), the Community of Madrid (-23.7%) and Castilla-La Mancha (-22.1% ).
In Catalonia, the decline was slightly lower than the national average, of -14.6%. The demarcation with the biggest decrease was Tarragona, with -16.92%, followed by Barcelona (-15.8%), Girona (-14.2%) and Lleida (-9.43%).
Marta Pérez Amigot, analyst at Ibercaja, warned that it is foreseeable that the granting of mortgages will continue to decrease. “The financial system has the capacity to continue granting credit, but demographic and social trends, the slowdown of the economy and the rise in interest rates point to lower demand from families,” he said.
In the same sense, Juan Villén, director general of the mortgage area of ​​the Idealista portal, predicted that the year-on-year drop in mortgage firms will continue “at least until the end of summer”. According to his opinion, the fall is due to “the sharp increase in interest rates, which has expelled part of the demand, and on the other hand, to the great uncertainty caused by the latest regulatory measures. This explosive cocktail, together with the increase in profitability of alternatives such as fixed income, means that many families and many investors have decided to postpone purchase decisions, waiting for a more positive scenario, which we do not see coming in the near future short term, at least this year”.
