The historic rise in interest rates by the European Central Bank (ECB) in the last year is cooling the mortgage market at high speed. The signing of loans for the purchase of a home is reduced as the conditions offered by banks to access a mortgage become more restrictive. Thus, according to the latest data published by the National Institute of Statistics (INE), the mortgage signing fell by 19% last July compared to the same month in 2022.. While the interest on the new loans that were signed stood at 3.24%, its highest level since August 2016.

Last July, a total of 29,233 mortgages were recorded, compared to the 36,000 that were signed the same month last year. A difference of almost 7,000 loans that has its origin in the sharp rise in official interest rates, which catapulted the Euribor to 4.2% that month. Thus, while in July of last year the average interest on the loans that were signed was 1.92%, just one year later it has risen to 3.24%. Never before in the last 20 years has there been such a sharp increase in the interest on mortgages signed as what has been seen throughout 2023.

Furthermore, in this context of high rates, banks are being especially cautious when granting loans. They see more risks of insolvency in their clients and a more pessimistic macroeconomic scenario, which has caused the percentage of rejected applications to increase.. It is not just that mortgages are more expensive, the loans granted are also becoming smaller and smaller, although this is being less noticeable.. In July, the average mortgage amount amounted to 143,412 euros, 2.6% less than in the same month last year.

The fixed rate offer continues to disappear from the market as a result of interest rate increases, which make anchoring to a high fixed rate for 25 or 30 years increasingly less interesting. However, it is still the preferred option for buyers.. Last July, 58% of the loans signed were with a fixed interest rate, the lowest percentage since April 2021. The boom in mixed mortgages—those in which part of the loan is at a fixed rate (normally the first years) and another at a variable rate—is reflected in the recovery of variable mortgages, which already account for 42% of loans. signed.

Fewer mortgages, fewer sales, but prices resist

The real estate market has been showing clear signs of cooling for months, also in sales. The number of housing transactions plummeted last July by 18.5% year-on-year, according to notarial statistics.. However, house prices are resisting falling. According to data provided by notaries, in July prices had barely fallen 4.6% compared to the same month of the previous year.

One of the reasons that explain this phenomenon is that in recent months the number of sales that are closed without the need for a mortgage has been on the rise.. In July of last year, 49.6% of operations were executed without the need for a loan, compared to 54% currently. Other important factors that explain the resistance of prices are the shortage of new housing supply and the sharp rise in the prices of construction materials.

From the Idealista real estate portal, the general director of Mortgages, Juan Villén, points out that the data released this Wednesday reinforces the trend seen in recent months. “We think that the coming months will maintain this line, although it is possible that by the end of the year the drop in transactions will slow down and, at some point, the rise in prices will also find its ceiling,” he points out.

“The second part of the year will be marked by the possible moderation in rate increases, as well as the legislative and political situation, which has yet to be determined,” points out, for his part, Ferran Font, Director of Studies at the piso.com portal.