The mortgage market is recovering from the slump at the end of last year. Mortgages on homes increased by 2.9% year-on-year in January, reaching 37,435 loans, the highest figure in a month of January since 2020, when more than 40,200 mortgages were signed, according to data released this Monday by the National Institute of Statistics (INE).
The mortgage firm thus returns to positive rates after the 8.8% collapse in December 2022 that broke the 21-month streak of consecutive year-on-year increases. In monthly rate (January over December), the increase was 24.5%.
The average amount of mortgages rose 1.3% year-on-year, to 142,654 euros, while the capital lent grew 4.3%, to 5,340.2 million.
The European Central Bank (ECB) maintained its monetary tightening policy despite the banking turmoil in recent weeks and raised the price of money by another 50 basis points a week ago. In this context, the Bank of Spain warns consumers that the consequences of these policies will begin to be felt in the mortgage market from the second quarter of the year. The director of studies at pisos.com, Ferran Font, indicates that 2023 begins confirming “the trend towards moderation”. He points out that “accumulated activity for twelve months has stopped growing and has stabilized around 465,000 loans granted for the fourth consecutive month. The forecasts are that this volume begins to decrease as the mortgage market cools down.
Fixed rate rebound
The average interest on housing loans was 2.65%, above the 1.85% of a year earlier and the highest since June 2018, due to the increase in the cost of financing due to the sharp rise in interest rates and the rise of the Euribor. The average term stood at 25 years and fixed rates recovered some ground. 32.6% of the mortgages were established in January at a variable rate, while 67.4% were signed at a fixed rate. The fixed rate option rebounded to the highest levels since September 2022 from 65.5% in December. The average interest rate at the beginning was 2.38% for variable-rate home mortgages and 2.79% in the case of fixed-rate mortgages.
Experts point out that those with mortgages are trying to take refuge in the fixed rate in the face of the vertical rise of the Euribor, which is already close to 4% when a year ago it was still trading negative. However, this trend is expected to start to change as banks no longer offer such attractive fixed rates since interest rates began to rise. In fact, most entities already sell fixed mortgages above 3% APR. The percentage of fixed loans reached maximums in April of last year at 75%.
For its part, the Euribor, the index most used in Spain to calculate the price of variable-rate mortgages, continues unstoppable and is now around 3.5%, its highest level since November 2008. This means that variable loans that must be revised according to this data will become more expensive again, up to about 600 euros per month.
The INE has reported that it has proceeded to review the statistical series of interest rates since January 2020 after launching a new procedure to validate the results of the initial average interest rate in the constituted mortgages. In this sense, he explained that the changes made in the validation process of these records consist of a readjustment of the filters for accepting anomalous values, which improve the estimation of average interest rates. “In this way, the revised series more accurately reflects the level of interest rates and their evolution over time,” says the agency.
The communities with the highest annual increases in the number of home mortgages in January were Comunidad Foral de Navarra (+31.2%), Canarias (+26.7%) and Extremadura (+18.0%). In turn, those with the greatest decreases were Aragón (-31.8%), La Rioja (-23.3%) and Principado de Asturias (-18.8%).
Like mortgages, home sales also resumed their upward path in January, growing by 6.6% year-on-year, according to the INE. For Santiago Martínez Morando, head of Economic and Financial Analysis at Ibercaja, the “shy improvement in mortgages is consistent with that in home sales. However, it seems like a one-off rebound that will hardly reverse the change in trend that began in the sector in the last quarter of 2022.”
He explains that “the financial system has the capacity to continue granting credit, as shown by the solvency indicators or the credit-to-deposit ratio (which is below unity) and has worked to adapt its offer to the new conditions with a broad repertoire of mortgages at fixed, variable and mixed rates, but demographic and social trends, the slowdown in the economy and, above all, the rise in interest rates, point to less demand from households”.
According to Font, “in all probability, we will go towards a more moderate scenario than that of the previous year. In 2023 the rise in mortgage prices and the uncertainty generated by political and legislative changes will be the reality for a good part of the year”.
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