In case there was any doubt about the change in the cycle in the mortgage market, the INE statistics for 2022 have cleared them all up in one fell swoop. Pushed by the brutal rise in the Euribor -which is already scaring above 3.6% in the daily rate- and the expectations of new increases in the interest rates of the European Central Bank (ECB), the bank has raised the prices of mortgages up to levels of the past decade.
Or almost five years ago in the case of the average rate, which has climbed to 2.67%, well above the 2.44% of 2020, when the market registered historical lows. At that time, the Euribor continued on its endless journey through the desert of negative rates and the banks were putting together the most attractive mortgage offer in history. There was cake for everyone because the bank was willing to lower the bar of demands a lot.
“It was a time of coffee for everyone that only temporarily cut the pandemic. But the post-Covid-19 stoppage followed a very rapid recovery, because the blood did not reach the river and, after all, interest rates were in negative levels. For all banks the absolute priority was to sell mortgages, and they did it like never before in recent years, broadening the scope to all economic levels,” they point out in a large Spanish bank.
180 degree turn
But the situation has turned 180 degrees in just one year. The inflation rally, the economic impact of the war in Ukraine and, of course, the rise in interest rates, threaten to exclude thousands of families from the possibility of financing a home. In fact, it has already been doing so for a few months – house sales fell by 10% in December – but everything indicates that the process will continue further.
CaixaBank has just issued an unequivocal message in this direction. He believes that the mortgage effort that families must face will be 38% in the first half of this year. If this forecast is fulfilled, it would return to levels not seen since 2011, when the world continued to suffer the consequences of the great real estate and financial crisis that had the Lehman Brothers crisis as its great icon.
If current effort levels below 35% start to become unacceptable indeed, a stretch to close to 40% would be more than worrying. “We are beginning to be much more selective in the concession. We can no longer maintain the standards of a year ago, far from it. The best prices are only for very solvent families. It is about limiting the risks of future defaults,” they point out in a big bank.
In the entities they recognize that, in view of the evolution of interest rates, another round of price increases will be irremediable in the second half of the first quarter. Especially in fixed-rate mortgages, the weight of which is plummeting in the commercial offer of banks, which are now boosting variable-rate and mixed-rate loans, which do benefit from the rise in rates.
In the sector it is taken for granted that, with all these cards on the table, in 2023 there will be a drop in mortgage activity that in the best of cases would be 10%. Bad news for families who, since the second half of last year, have more than doubled the price of fixed mortgages and do not want to take the risk of variables.
