The European Central Bank began the new era of monetary policy in July 2022 by raising rates for the first time in eleven years. The supervisor’s objective is to curb inflation by cooling consumption. In Spain it is already being noticed. Since that first rate hike, The contracting of mortgages has begun to fall and, in addition, the global mortgage balance has fallen. In fact, since the month of July the Spanish have “removed” 10,753 million euros in mortgages.
According to data from the Bank of Spain, Household mortgage loans, which represent the majority of its total debt, stood at 508,376 million euros in February 2023, which is 1.3% less than a year ago and 0.4% below the figure for January. That is to say, with respect to a year ago, the mortgage balance in Spain has been reduced by 6,539 million. However, that figure increased to levels not seen since August 2019 at 519,129 million euros in July. Since then, it has been reduced by 10,753 million euros.
Monetary policy is one of the main reasons why that number has fallen by almost 11 billion euros. Spaniards take out fewer mortgages because their price is much higher. In addition, it must be taken into account that 70% of the outstanding mortgage balance in Spain is at a variable rate, this type of mortgage is being affected by the rise in the Euribor (due to the rise in rates), which is why many households They are taking advantage to amortize and thus avoid paying more money in their monthly installments.
It should be noted that the Euribor continues at the highs of December 2008. In February, the index to which most mortgages are referenced closed at 3.534%. In March it has continued its rise, but the advance has been the lowest since March 2022 due to the banking crises at Silicon Valley Bank and Credit Suisse. Despite this slowdown, the Euribor has continued to rise, so the mortgage balance will foreseeably continue to fall.
Likewise, it must be taken into account that 60% of variable mortgages in Spain have not yet been repriced, that is, they have not suffered the rise in the Euribor. Another point that should not be overlooked is that in the first years of the mortgage loan is when more interest is paid, so many of these mortgages will not be so affected by the rise in that index. The rise in the Euribor means that the quota has increased by almost 50%. According to Asufin data, for a mortgage of 100,000 euros with a differential of 1% plus Euribor, the monthly payment will rise by 196 euros, which means 2,350 euros per year.
Added to the amortization of the mortgage debt is the reduction in the number of new mortgage firms due to the current economic situation and the increase in the cost of these products. Financial institutions are taking advantage of the rise in the Euribor to raise interest on fixed-rate mortgages, since customers are going to prefer this product because it gives them the security of knowing what they are going to pay every month.
Currently, it is difficult to obtain a fixed mortgage product below 3%. On the other hand, Variable mortgages are getting cheaper, but they run the risk that the Euribor will continue to rise.
Data from the Bank of Spain show that the amount that families allocate to their homes continues to occupy the majority of their indebtedness, since it represents around 73.4% of it.
In general terms, the credit granted by financial institutions to families and non-profit institutions residing in Spain fell by 0.8% in February 2023 compared to the same month in 2022, to 692,466 million euros. Compared to February 2022, credit granted to families has fallen by 5,627 million.
For his part, household loans for consumption grew by 3.6% in February in the interannual rate, up to 94,853 million euros, although it fell slightly in relation to the previous month (0.6%).
Family loans for other purposes totaled 85,859 million euros, below the 88,701 million a year ago and the 86,247 million in January.
