The rise in interest rates, at the highest level in five years, and the darkening of the economic outlook have brought mortgage granting to a halt: according to INE data, in March banks granted 36,182 mortgages on homes, a 15.7 % less than last year, with an average amount of 142,663 euros, 1.5% lower.
The fall in March deepens the slowdown in the mortgage market in February, in which loans fell 2% and broke a streak of 21 consecutive months of year-on-year increases. According to INE data, the total capital lent by banks amounted to 5,161 million euros, with an even greater year-on-year drop of 17%.
According to María 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 decrease caused by the change in monetary policy that has come eight months after the first rate hike. In her opinion, "the fact of exceeding 35,000 mortgages returns us to normality with pre-pandemic levels of 2019. The data continues to be very positive, indicating that the mortgage market remains strong and stable."
Along the same lines, Javier Torres, head of mortgages at Clikalia, pointed out that these are positive data, because they confirm that the rise in rates "is managing to cool the market in order to avoid greater evils without significantly affecting real estate activity."
In March, fixed-rate mortgages continued to lead the market, with 63.9% of all loans granted, but variable rates continued to gain weight, accounting for 36.1% of total loans, partly due to the rise in mixed mortgages, which guarantee an interest rate during the first years of the life of the loan, 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, as the European Central Bank continues its rate hike process, they will return to Variable rate loans will be more numerous, as they had always been in the Spanish market until March 2020.
“The strategy of financial institutions to lower the price of variable mortgages and harden fixed ones is already having results. Those of these months will be practically the last credits that are signed at a fixed rate and it is expected that there will be an even more pronounced change in the trend. Although we will also begin to see how varieties such as mixed mortgages emerge, which is becoming the star product of banks, ”says 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 of the mortgages signed in February 2022, the rates have become more expensive by 70%. By type of credit, the average interest rate at the start was 2.72% for variable-rate home mortgages and 3.15% for fixed-rate mortgages.
By autonomous community, the fall in registered mortgages has been widespread, and only in Asturias did they rise, a slight 0.8%. After the Principality, the smallest decreases occurred in the Canary Islands (-5.6%) and Comunitat Valenciana (-6.3%). At the other extreme, the communities that presented the greatest decreases were Illes Balears (-31.0%), the Community of Madrid (-23.7%) and Castilla-La Mancha (-22.1%). In Catalonia the decrease was slightly lower than the state average, of -14.6%.
Marta Pérez Amigot, an analyst at Ibercaja, warned that it is foreseeable that the granting of mortgages will continue to fall. "The financial system has the capacity to continue granting credit, but demographic and social trends, the slowdown in the economy and the rise in rates point to lower demand from households."
In the same sense, Juan Villén, general director of the mortgage area of the Idealista portal predicted that the year-on-year drop in the mortgage firm will continue "at least until the end of summer." In his opinion, the fall is due to “the sharp rise 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 increased profitability of alternatives such as fixed income, means that many families and investors have decided to postpone purchase decisions, waiting for a more positive scenario, which we do not see coming in the short term, as except this year."