The banking sector is looking to revive this income stream after a disastrous 2023 and is anticipating the ECB’s rate cut with a better offer on fixed rates
Enough is enough. Banks in Spain want to put an end to the sharp fall in their mortgage business in these years of a constantly rising Euribor (interbank lending rate), which has led to the disappearance of much of the demand. According to INE (national institute of statistics) data, in 2023 some 381,560 mortgages were recorded in Spain’s property registry offices, 18% less than the previous year, with many new owners opting to pay for their new home with savings generated. «The drop in lending was above what we expected and, after the lending drip-feed dried up completely in the final stretch of the year, there is now an order to pick up the pace,» stated the spokesperson for one national financial institution.
In the case of this institution, it began by offering better terms and conditions, but only to customers fitting a certain profile. Now, however, it has begun to hold out its hand to the rest of the market, including those who cannot do without the banks as they do not have sufficient financial capacity. «After a difficult 2023 for the mortgage sector, in 2024 it is essential to recover the contracting of such financing. Buyers will benefit greatly from this scenario,» explained Ricard Garriga, managing director of Trioteca.
In fact, the mortgage business in Spain has already begun to show some signs of recovery in the first months of 2024, with the idea of fattening up these portfolios before the lending ‘drought’ that tends to be the main feature of such operations once summer arrives.
INE data show that 33,128 mortgages were taken out in January. This is still 10% below the annual rate, but almost 33% more than in December 2023. «We are not facing a cut-throat war, but movements are beginning to be seen. Banks are preparing for the possible European Central Bank (ECB) rate cut in June and there are many people waiting and they might be keener to borrow,» said Estefanía González.
The numbers that determine whether the contract is signed also reflect how banks have started to bring forward their ‘sales’. In terms of pricing, this is most noticeable in fixed rates. «After many months of rising prices, in February they fell by an average of 0.3%, and the downward movement gained momentum in March and April with decreases of 3% year-on-year… this is already significant,» say the banks. It should be noted that these data correspond to the standard offer by banks for a 25-year mortgage, not the average rates of the INE, whose latest data are from January and reflect a rise in fixed rates to 3.64%.
Data from rate-checkers indicate that the average on this standard offer is now around 3.2%, «something we have not seen since February last year». What’s more, there are already nine fixed mortgage products on offer — a third of what’s currently on sale — below 3%, with Sabadell’s being the cheapest (if only measured by the interest rate) at 2.6%. Plus you can get better prices if you have the patience to negotiate with the bank. «Through our intermediary we are getting between 2.2% and 2.3% in fixed rates for acceptable customer profiles, they don’t have to be civil servants or airline pilots,» explained González.
It is true that, compared to the sub-1% mortgages that existed before the economic crisis, today’s loans are very expensive. But experts believe that between May and June it will be possible to get decent deals, although they are aware that it will be almost impossible to return to the levels of the negative interest rate era.
Although mixed mortgages (fixed repayments moving to variable later) continue to be the most popular option offered by banks, fixed-rate mortgages are also recovering the ground they lost to variable-rate mortgages. Moreover, according to the INE, these lending products again increased in strength in January to 58.2% of the total market — compared with 45.8% for variable rates — four points more than the 54.2% in December. «For the time being, and although the outlook is for the Euribor to go down, people are scared and don’t want to know anything about variables», say the analysts.
So these are the offers that will dominate the banks’ shop-fronts in the next few weeks. «The demand is there, in the mixed and in the fixed. And the banks want to boost this business being fully aware that, after summer, in September, October and November they may have to lower prices further if the ECB continues with its monetary openness. So they need to close those deals now,» stated González. Ferrán Font, research director for Idealista.com, agreed that «the financial institutions have anticipated the ECB’s new scenario by applying reductions and starting their own particular war to attract solvent buyers». In his opinion, the B-side of this turn in the market is that it will reduce «significantly the margin for adjusting prices» in housing.
