• Market Buy housing or better wait in case prices fall?

After years in negative territory, the Euribor returned to positive territory in April 2022. It has just been a year since that financial milestone and, coinciding with it, mortgage renegotiations soared to record highs. It is the most obvious picture of the slow but almost agonizing effect that rate hikes are having on domestic economies.

In the fourth month of 2023, changes in mortgage conditions covered loans worth 2,503 million euros, which is the highest monthly level for this type of operation since the Bank of Spain began offering this figure in January 2015.

Only the April figure is already more bulky than all the renegotiations that took place in 2022 (1,910 million), 2021 (1,744 million), 2019 (1,318 million), 2018 (1,744 million) and 2017 (2,357 million). On the other hand, it is below the renegotiations registered in 2020 (2,605 million), 2016 (6,396 million) and 2015 (9,241 million).

The main reason is to be sought by looking at Frankfurt. The European Central Bank (ECB) began raising rates in July last year to try to slow the advance of inflation. His recipe against prices was intended to restrict credit to companies and households and so it is happening, but at the same time it has caused a rise in mortgage market prices and an escalation of the Euribor that is pressuring people and families with a variable-rate housing loan.

The indicator ended the month of May at a level of 3.862%, close to the 4% that would return it to 2008 levels, in the twilight of the real estate bubble. The mortgaged who have to review their loan taking the reference of May could fit an increase of almost 300 euros in their monthly installments, which is something that many households are already assuming with revisions in recent months.

The scenario is complex, taking into account that to the increase in mortgages, families have to add the impact of inflation on the cost of living and its erosive effect on the purchasing power of households. Given this scenario, many mortgage holders are trying to renegotiate the conditions of their home loans.

The renegotiations contemplate alternatives such as modifying the repayment terms of the loan, changing the interest rates paid for it or modifying the rate from fixed to variable, the most common case in recent months. Not surprisingly, mortgages signed at a variable rate have experienced during the first three months of the year increases in the interest rate they pay above 3.8 percentage points.

Amortizations

Along with the renegotiations, there is also an increase in mortgage repayments and that explains the decrease in the outstanding balance in the mortgage portfolio of all Spanish entities. This balance was 504,355 million euros in April, its lowest level since January 2021.

Mortgages signed in April reached 6,231 million euros, which is the highest level since July 2022, as well as an increase of 16.1% compared to March. By maturity term, mortgages signed in April with less than one year of maturity were 2,456 million (39% of the total), while maturities between 1 and 10 years accounted for 22%. Those of 10 years stood at 2,386 million euros, 38% of the total.

Regarding the price, the weighted average interest rate of the operations signed in April was 3.48%, seven basis points less than in March. This decrease is due to the fact that the interest rate of the renegotiations fell by 19 basis points, to 3.29%, while that of the rest of operations rose by five basis points, to 3.60%.

  • Housing
  • Mortgages

According to the criteria of The Trust Project

Learn more