Spanish mortgages (-18% year-on-year in April) are at 3%, for 24 years and for €137,000

Mortgage law Spain

Marta Pérez Amigot, Economic and Financial Analysis Unit of Ibercaja| The Bank of Spain published a report last week in which it warned of a stranglehold between supply and demand in the housing market, which means that property prices are resisting a fall despite the decline in activity.

Two main ideas may be drawn from it: 1) After the initial impact of the pandemic, the demand for home ownership has recovered, on a national scale, with greater intensity than supply, which is more rigid in the short term, resulting in a certain mismatch between the two and upward pressure on prices. And 2) Currently, and despite the rise in the cost of credit, due to the tightening of monetary policy, in the current inflationary environment in which we find ourselves, it is foreseeable that house prices, in nominal terms, will continue to show greater downward resistance than the quantity variables of the residential market, such as sales and purchases or building permits, due to the scarcity of new construction, the high cost of construction materials and the favourable asset situation of the different agents in this market.

Moreover, last month we commented that we expected this year, 2023, to consolidate the change, vs. 2022, towards lower levels of mortgage lending. The fact is that the financial system has the capacity to continue granting credit, but the current situation (economic slowdown, rising interest rates – the average interest rate on new mortgages on homes is up more than one point on the previous year, to 3.09%, among others) points to lower demand from households.

All of the above is perfectly captured if we look at the data published today by the INE, which shows how the number of mortgages granted for homes in Spain fell by -18.3% year-on-year in April (after -15.7% year-on-year in March), to 27,053, so that the total amount granted fell by -21.6% year-on-year.

However, if we focus our attention now on the average amount, with data at the end of April 2023, this mantra of “resistance to the fall” can be seen, and this has decreased, although much less than in total amounts, falling by -4.1%, to €136,945. Thus, for the first time since November 2021 (when it reached €138,189), it is less than €140,000.

Finally, and by way of comment, it should be noted that the average duration of residential mortgages continues to be around 24 years, and has remained in this range for some time now, with more than half a year to go, although everything seems to indicate that this downward trend will continue.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.