The weight of the fixed rate mortgages to finance the acquisition of households keep losing weight by assuming 63.9% of all signedcompared to 36.1% of variable interest, according to data from March Statistics National Institute (INE). The proportion of new mortgages at a fixed rate is the highest since May 2021. Added to all this is the slowdown in the granting of loans to finance the purchase of real estate as a result of the increase in interest rates.
Since last summer, loans to finance housing with a fixed interest, which reached their all-time highthey have fallen about 10 points in terms of their proportion over the total, and they are giving up ground that those of variable type. In any case, within these, the ones that stand out, although they are not counted by the INE statistics, are the mixed mortgagesin which the first five or 10 years, the period in which the financial burden weighs the most, keep the interest fixed.
On home mortgages at variable interest, the initial average interest is 2.72% and in those for fixed rate mortgages, 3.15%. The banks offer more attractive conditions in variable and mixed than in fixed, in which you have to be anchored for a period of 20 or 30 years at a rate that is above 3% and close to 4% and even exceeds it in some cases, to around 5%. All this discourages the contracting of this type of mortgage.
In mortgages constituted on homes, the average interest rate, which includes both variable and fixed rates, is 2.99% and the average term is 25 yearss. In March of last year it was 1.80%, which reflects the impact of the rise in interest rates by the European Central Bank (ECB)which began in July last year to combat escalating inflation.
The data reveals a slowdown in the property market after interest rate hikes were passed through to the euribor, the main reference for variable interest mortgages, which continues its trend towards 4%. In April of last year, this reference entered positive territory after being negative since 2016. The monetary authorities admit that the process of increases could be coming to an end, but at the same time they highlight that the price of money at current levels will last for an “extended” period until reaching the goal of inflation of 2% in the medium term.
And the slowdown, which the Bank of Spain expects will produce a “soft landing” in prices, is also seen in the number of mortgages constituteds on housing that in March was 36,182, 15.7% less than a year ago, although it advanced 0.8% compared to the previous month. And its average amount, of 142,663 euros, with a decrease of 1.5%. The impact on the market is noticeable, since the increases in the number of home mortgages granted in the months of March 2021 and 2022 compared to the previous month were 15.4% and 17.2%, respectively, while this year it was only 0.8%.
Related news
With the year-on-year decline in March, the home mortgage firm chains two months of negative rates after the fall of 2% that was recorded in Februarywhile accumulates a year-on-year drop of 5.6% in the first quarter. Financial institutions have tightened the granting of this type of loan, which, in turn, is less attractive after the increase in the legal price of money from 0% to 3.75% in just 10 months, the largest and fastest increase in the history of the euro This evolution has already been transferred to the market for months, as the Bank of Spain admits and reflects the survey on bank loans of the ECB referring to the first quarter of the current year.
Analysts predict that the 12-month Euribor will peak at around 4%, while at the end of next year it could drop to around half. panel funcas, which includes estimates from 19 study services, predicts that this indicator will reach 4.25% this year and 4% next year. This evolution, which on some occasions has been zigzagging when there have been possibilities that the increases would slow down, will be closely linked to that recorded by the interest rates set by the ECB.