The sharp rise in interest rates puts pressure on the mortgage business. The home loan firm deepened its decline in April to 18.3% compared to the same month last year, to a total of 27,053, the lowest figure since December 2020. The drop is greater than that of 15.7% registered in March and that of 2% in February, according to data from the National Statistics Institute (INE) published this Thursday, which confirms the clear slowdown in the market due to the increase in financing costs.
The operations link three months of negative rates, and experts predict that the trend will continue downward, in a context of credit tightening by financial institutions and the sharp rise in the Euribor index that affects demand. In fact, after the continuous increases in the governing rates by the European Central Bank (ECB) since July of last year —there are already eight consecutive ones— to try to contain inflation, the average interest rate for mortgages used to purchase homes has It has risen by 1.32 points in one year to now stand above 3%, specifically at 3.09%, its highest value since April 2017. Just three months ago it stood at 2.65%. The average term of mortgages is 24 years.
In addition, given the banks’ commitment to variable interest rates to the detriment of fixed ones, variable-rate loans continue to eat up ground and already account for 38.7% of the total, the highest percentage in April 2021. 61.3 % of home loans were established at a fixed rate, 14.1 points less than in July 2022, when a maximum of 75.4% was reached. The average price at the beginning was 2.78% for variable rate mortgages and 3.29% in the case of fixed rate ones.
Javier Torres, Clikalia Group’s head of mortgages, explains that “the effect of restricting access to credit that the ECB rate hikes are having is noticeable. We believe that the situation of access to financing will not improve this year. The rise of 0.25 points just a week ago, and the announcement of possible new rises in July, makes financial institutions react by adjusting their mortgage offer and increasingly stop betting on fixed rates”. In his opinion, “everything points to the fact that financing is going to be increasingly expensive and complicated.”
The average amount of mortgages constituted on homes fell by 4.1% year-on-year in the fourth month of the year, to 136,945 euros, while the capital lent decreased by 21.6%, to 3,704.7 million euros.
On a month-on-month basis (April over March), home loans plunged 25.2%, while borrowed capital fell 28.2%. In both cases they are the biggest decreases in a month of April in at least five years. In the first quarter of 2023, home mortgage loans have decreased by 8.4%, with a 9% decrease in borrowed principal and a 0.7% decrease in average principal.
The Spanish Association of Consumers maintains that the increase in rates is drowning families. “This supposes a new tightening of the economic conditions of Spanish households, while it will entail a high payment of the mortgages at the same time that it will negatively influence the granting of new mortgage loans”, he points out.
Marta Pérez Amigot, from Ibercaja’s economic and financial analysis unit, 2023 will consolidate the change in trend compared to 2022 towards lower levels of mortgage granting. In her opinion, “the financial system has the capacity to continue granting credit, but the current situation of slowdown in the economy and rise in interest rates point to less demand from households.”
The rise in rates means that money costs more and, therefore, the ECB applies a higher interest than in the past to banks in the euro area that borrow with the aim of giving credit. This immediately causes financing to become more expensive and the demand for credit to slow down, since a greater effort must be made to obtain financing, something that is already being reflected in the latest statistics on the real estate market.
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