The end of the last mortgage boom and the extinction of the fixed rate spell the change in the cycle in home purchases
Fixed-rate mortgages were the star product of the last mortgage boom unleashed by the coronavirus. Now that boom has come to an end and fixed rates are in the process of extinction. The change in monetary policy of the European Central Bank (ECB) has ended both processes at once: the Euribor is firmly moving towards 4.5%, credit prices have become more expensive and banks are making it increasingly difficult to grant a loan that is not totally or partially variable.
The change of cycle is a fact in the mortgage scenario. The market has already accumulated six months of consecutive declines compared to the previous year and, what is more complex for families, the conditions to access a home loan have become more complicated. This means, on the one hand, that they obtain less and less financing for this purpose and, on the other, that this financing is subject to less favorable conditions.. Starting with the price.
The average rate at the beginning of the loan stood at 3.24% in July, the most expensive level since August 2016. All in all, it remains almost one point below the 4.13% that the Euribor marked yesterday in its daily evolution, the result of competition between entities that use mortgages to link clients with more attractive profiles.
This competition, however, is not based on fixed-rate mortgages.. During the pandemic, with rates below zero, banks and families opted for this product to the point that for the first time in Spain they surpassed variable rate ones in proportion and reached 75% of the total loans signed. in April 2022. The trend has turned around.
Since the beginning of 2023, fixed-rate loans have been losing ground and in July they accounted for 57.8%, compared to 42.2% for variable ones. “The strategy of financial institutions to make variable mortgages cheaper and fixed mortgages tougher is already having results and it is expected that there will be an even more pronounced change in the trend to the detriment of fixed mortgages.. We are already seeing varieties such as mixed mortgages emerge, which are becoming the star product of banks,” explains María Matos, Director of Studies and spokesperson for Fotocasa.
The rise in mortgage prices is one of the factors behind the 18.8% decrease recorded last July, according to the latest available data presented yesterday by the National Institute of Statistics (INE).. “As the ECB announced, high interest rates will remain for a prolonged period, so the decline in mortgages granted can be expected to continue in the coming months, although the pace will moderate as we approach transaction levels. sustainable in the medium and long term,” says Santiago Martinez, head of Economic and Financial Analysis at Ibercaja
In total, 29,223 new contracts were signed for the acquisition of a property, a decrease caused, in part, by the change in the usual buyer profile.
More than half of sales transactions are closed without the need for a mortgage. In recent months, an increase has been detected in the number of buyers with high financial solvency, with knowledge in the real estate sector, as well as an increase in foreign demand, profiles, in any case, that need less financial help than the average Spaniard. because it has greater purchasing power. Forecasts indicate that its weight in the market will increase. “The buyer profile will specialize and become professional, focused on investment, especially foreign investment,” warns María Matos, from Fotocasa.