The granting of mortgages accumulated five consecutive months of falls in June, and suffered a setback of 21.9%, according to the INE, due to the rise in interest rates and the greater prudence of banks and citizens, which is slowing down demand and the granting of credits. The fall affected all communities except the Canary Islands, and exceeded 30% in Cantabria, Aragon, Castilla y León and La Rioja.
According to the National Institute of Statistics, in June banks granted 33,478 mortgages on homes, the lowest figure in a month of June since 2020. The average amount was 141,796 euros, 0.7% less than last year. In June, financial entities as a whole lent 4,814.0 million for the purchase of housing, with an even greater annual decrease of 22.5%.
In the first six months of the year, the cumulative fall in the granting of mortgages has already reached 13.7%, while the capital lent by financial institutions has been reduced by 15%.
The granting of mortgages has been falling at double-digit rates for four months, the last two with drops of more than 20%. Since September 2022, when rates began to rise, only in January did financial institutions increase the granting of mortgages, although the year-on-year rate was a modest 2.9% rise. In the following months, the fall has accelerated: from 2% in February, it went to 15.7% in March, to 18.3% in April and to 24% in May, the biggest decrease in two years.
In June, the average interest rate on home mortgages was 3.19%, the highest rate since April 2017, and the average loan term was 24 years. From 1.76%, which was the average rate of the mortgages signed in February 2022, the rates have become more expensive by 81%. The average interest rate at the start of variable rate mortgages was 2.84% and 3.45% for fixed rate mortgages.
The higher cost of fixed-rate mortgages is making them lose market share, and in May they accounted for 60% of the loans, compared to the 75.4% they reached in July 2022. 40% of the loans were already in May at a variable rate, a category in which the INE includes mixed mortgages (with a fixed rate for the first few years). According to María Matos, Director of Studies at María Matos, Director of Studies at Fotocasa, "the strategy of financial institutions to make variable mortgages cheaper and harden fixed ones is already having results and it is expected that there will be a change in the trend even more defendant to the detriment of fixed mortgages. We are already seeing how varieties such as mixed mortgages emerge, which are becoming the star product of banks”.
The Communities with the highest number of mortgages constituted on homes were Andalucía (7,043), Catalunya (5,336) and the Community of Madrid (5,675), which leads the ranking by loaned capital, with 1,218 million euros, followed by Andalucía, with 883 million. .
The granting of mortgages fell in all communities except the Canary Islands (with an increase of 5.4%), while the capital lent by banks also fell in all territories except the Balearic Islands (9.3%)
The greatest falls in the number of mortgages granted were in La Rioja (64.7%), Castilla y León (41.2%) and Aragón (33.0%). The greater relative strength of the large markets such as the islands, Catalonia and Madrid, which fell the most at a rate of over 30%, has allowed the rate of decline in credit granting to be contained in June.
The fall in mortgages reflects the evolution of rates, with a Euribor that in June already reached 3.996%. Yesterday it was 4.07% and it will close the month above 4%, with a slight respite compared to last month, but with the prospect of new rate hikes by the ECB it could take it to 4.5% at the end of the year .
The concern of the citizens before the escalation of the Euribor is also reflected in the data of the novations presented by the INE. In June, 8,633 novations of home mortgages were made, 30.6% less than a year ago, when the majority of citizens resorted to this practice to shield themselves from the already foreseeable rise in rates. After these registry changes, the percentage of fixed interest mortgages increased from 14.5% to 39.5%, while that of variable mortgages decreased from 84.5% to 59.3%.
According to Juan Villén, director of the mortgage department of the Idealista portal, he highlighted the slowdown in mortgage activity due to the rise in rates “expels those families with lower incomes from the mortgage market, due to the increase in the cost of mortgage payments. Banks continue to focus on strong variable mortgage refinancing activity, converting them to fixed and especially mixed rates”. In his opinion, the situation will remain similar in the coming months, and the mortgage market will close 2023 with "a significant drop in the volume formalized compared to 2022, with a slight, but continuous, rise in prices."
The Fotocasa spokesperson, for her part, highlighted that the data for June are still higher than those prior to the pandemic, which reflects that "the slowdown is a reality, but it occurs gradually." Matos points out that "despite the sudden increase in the cost of loans, it has not yet been detected that a large volume of variable-rate mortgagees are requesting to take advantage of the Code of Good Practices of banking entities", and that porter studies estimate that only a 8% of the mortgaged will consider that option. In his opinion, this may be due to “the fact that there is great ignorance among the mortgagees themselves. Another cause could be due to the fact that the entities are negotiating with clients before offering them to join the agreement, as reflected in the large number of novations”.
