The Decline in Spanish Mortgage Market Continues, but Foreign Demand Boosts Canary Islands

The mortgage market closed another negative month in August in Spain. According to the INE, in the eighth month of the year they were registered in the registries 28,344 loans for the purchase of housing throughout Spain, 22.7% less year-on-year and the second lowest figure since January 2021, only surpassed by last April.

However, in the Canary Islands, where foreign demand continues to increase, the number of mortgages taken out continues to increase. and reached 11.8% in August. Also the borrowed capital that grew by 3.9%. In the rest of the State, only in Murcia they grew slightly (4%), according to the real estate portal idealista.com.

The mortgage firm has accumulated seven consecutive months of declines in Spain and the last six have been double-digit falls. After the August result, So far this year, registered mortgages have fallen by 15.4%.

The decreases have also been imposed in the capital lent by banks for the purchase of housing, as well as in the average amount of mortgages. According to the statistics agency, The average amount of mortgages constituted on homes fell by 4.6% year-on-year in the eighth month of the year, to 138,171 euros, while the capital lent decreased by 26.2%, reaching almost 3,916.3 million euros.

Increasingly expensive mortgages

What does maintain the upward trend is the average interest rate on mortgages, supported by the policy of interest rate increases carried out by the European Central Bank (ECB) to try to contain inflation. Specifically, the average interest rate remained at 3.25% in August, compared to the previous 3.24%, marking its highest value since July 2016.

Compared to a year earlier, the average interest rate for home loans has increased by 1.3 points. It is the fifth consecutive month in which the interest rate exceeds 3%.

Regarding the type of mortgage, the INE states that 42.1% of home mortgages were established last August at a variable rate (a modality that includes variable mortgages such as mixed ones) while 57.9% were signed at a fixed rate.

Although they continue to represent more than half of the firms, they remain far from the historical highs of the summer of 2022, thus confirming the trend of their loss of steam due to the push for mixed mortgages.