Spain’s Mortgage Market: A Year-on-Year Drop and Insights into Interest Rates, Capital Lent, and Variable vs. Fixed Rate Mortgages

Mortgages in Spain Experience 10% Drop and Highest Interest Rates in Nearly 10 Years at Start of Year

The mortgage market in Spain is experiencing a 10% drop compared to January 2023, with 33,128 loans recorded in January 2024. According to data from the National Institute of Statistics (INE), published on Tuesday, the focus is on the average interest rate, which continues to rise and is now at its highest level since December 2014.

This year-on-year drop marks the twelfth consecutive month of negative rates. However, it is the least pronounced drop compared to the previous month. The average amount of mortgages on homes decreased by 2.7% year-on-year in January to €138,149 euros, while the capital lent decreased by 12.7% to €4,576.5 million euros.

The average interest rate for home mortgages in Spain was 3.46%, with an average term of 24 years due to the rate policy of the European Central Bank (ECB) and the evolution of the Euribor. About 42% of mortgages were at a variable rate and 58.2% at a fixed rate. The average interest rate for variable rate mortgages was 3.24%, and for fixed rate mortgages was 3.64%.

In terms of monthly changes, home mortgages increased by approximately 33% in January compared to December 2023 while the capital loaned increased by around 30.7%. The overall trend in mortgage financing indicates a moderation as stated by Beatriz Toribio, general secretary of the Association of Builders Promoters of Spain, who predicts that this trend will continue in coming months as interest rates are expected to fall further with competition among financial institutions intensifying.

The autonomous communities with the most mortgages on homes in January were Madrid, Andalusia and Catalonia with some regions experiencing a decrease in home mortgages compared to previous year while others showed an increase.

Changes in mortgage conditions have also decreased significantly with notable growth in entity changes.

Overall, experts anticipate changes in mortgage market as interest rates fall and competition among financial institutions intensifies.

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