The covid-19 crisis has brought with it several changes in the mortgage market. Beyond the fall in financing operations for the purchase of housing, the historical lows that the Euribor reached, the fall in interest due to the banking war or the pull of fixed-rate offers, data from notaries they also reflect a turnaround in loan repayments and a strong rebound in changes related to terms or amounts.
That is what a study by the General Council of Notaries states on the impact of the first year of the coronavirus crisis on the market. According to the notaries, the pandemic has reduced the number of acts carried out before a notary public by 6.1% compared to the acts granted in 2019. And they clarify that “this reduction is observable in the majority of notarial acts, especially in those activities more linked to the economic cycle, such as house purchase and sale operations, constitution of new mortgage loans or constitution of of new societies ”.
An example of these red numbers is found in the cancellation of mortgages, which in 2020 has registered the first decline in the last six years. Specifically, during the past year The cancellation of 296,704 loans were signed before a notary, 15% less than a year earlier and the lowest figure since 2015. On the other hand, in 2009 half a million mortgages were canceled and in 2007, just before the crisis broke out and the real estate bubble burst, cancellations exceeded 700,000 units .
However, the notaries say, not everything has been descents. “There have been increases in certain acts, such as the formalization of mortgage moratoriums, the novation of loans, the mortgage subrogations, the mortgage extensions or the acts of material transparency of the new mortgages, as mandated by the recent Law 5/2019 of the real estate credit contracts ”, emphasizes the study.
The impact of moratoriums
The most prominent case is the one starring loan novations, which in 2020 soared almost 300%, returning to 2013 levels, one of the most critical moments for the housing market in the previous crisis.
“From the first wave, support measures for workers, families and vulnerable groups in the form of moratoriums for the payment of interest and the principal of the loans contracted. These measures were extended and expanded in successive quarters (for example, to the benefit of companies in the tourism and transport sectors). Many of the moratoriums granted, either “sectorial” (granted by the entities) or “legislative” (granted in application of the approved norms), were formalized before a notary through loan novation, which in 2020 touched the 130,000 operations, which represents an increase of 298% compared to 2019 and the recovery of the levels of novations signed in 2013 ”, emphasizes the document. In fact, it is the highest figure since 2012.
Recall that the government and banks launched last year the possibility that workers and the self-employed affected by the impact of the health pandemic request a moratorium on loan payments. The Executive’s alternative established more demanding requirements (for example, having been unemployed or having suffered a severe cut in income; that the mortgage installment, plus basic expenses and supplies, should be greater than or equal to 35% of the net income of all the members of the family unit, or that before the moratorium the income of all household members will not exceed three times the monthly Public Indicator of Multiple Effects Income (IPREM), which is 537.84 euros (hereinafter IPREM), which means that they could not exceed the amount of 1,613.52 euros per month. In addition, families were obliged to prove their situation of vulnerability, as well as a deadline to present the documentation).
On the other hand, the sectorial alternative (the banking moratorium) set less demanding conditions (it was enough to have entered an ERTE, to have lost a job or to have suffered a significant loss of income or a cessation of activity in the case of the self-employed, although as long as the formalization of the mortgage was prior to March 14, 2020, before the first state of alarm came into effect).
The latest data from the Bank of Spain point out that at the end of last February, 222,256 legislative moratoriums had been granted, of the 265,061 total applications submitted, which add up to a balance pending amortization of almost 20,000 million euros; to which are added almost 820,000 sectoral defaults (which include mortgages and other loans), with a total outstanding balance of 32,500 million euros.
Both moratoriums have become operational again in 2021, after their suspension last September. The deadline to request them ends on March 30, with the possibility of benefiting from them for a maximum of nine months.
Extensions of terms and amounts grow in double digits
Data from notaries also point to a notable upturn in changes in mortgages related to the extension of terms or amounts, although more moderate than that experienced by novations.
“The effect of the economic crisis would have led citizens to carry out a series of notarial acts aimed at improving their solvency (subrogations in the debtor’s position, for example), reducing costs (subrogations of the creditor, delays in the cancellation of the mortgage ) or simply to have more bank resources to face the crisis financially (mortgage extensions) ”, the study assures.
En conceto, surrogacy increased 13% in 2020, up to 31,288 operations, while mortgage extensions did it by 12%, until 12,708 operations.
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