The mortgage firm sinks 19% in November while the average interest rate falls for the first time in ten months

The mortgage market has seen continued decline in November, marking ten consecutive months of decreases. Compared to the previous year, the mortgage firm decreased by 19.1% in November 2023. This downward trend has also impacted the average interest rate, which experienced a slight decrease due to the containment of the fixed rate.

According to data from the National Institute of Statistics (INE), a total of 32,645 mortgages were subscribed in November 2023, a significant decrease from the 40,335 registered in November 2022. Despite this decrease, the number of signatures in November was the second highest in the second half of the year. Additionally, it was 2.3% higher than the October figure and 10.8% higher than the same month in 2019.

María Matos, Director of Studies at Fotocasa, notes that the data reflect a period of stabilization and adaptation to the new high-rate monetary policy. The data from 2023 are similar to pre-pandemic figures, ranging between 22,000 and 35,000 operations.

The year-on-year drop of 19.1% in November is the smallest decrease since July and is below the 20% mark for the first time in four months. Throughout the year, the mortgage firm has seen a total decrease of 17.8% due to the impact of increasing interest rates and the resulting rise in financing costs and decrease in home sales.

In November, the average amount of loans granted for purchasing apartments also decreased by 0.5% compared to the previous year, amounting to 145,894 euros. Consequently, the total borrowed capital decreased by 19.5% to 4,763 million euros. Matos explains that one notable change from the new monetary policy is a reduction in housing demand from typical buyers, resulting in smaller loan requests.

The fixed rate sees moderation

Although the average interest rate saw a slight decrease in November, remaining above 3%, it is the first decrease since the beginning of the year. Specifically, it stood at 3.27% compared to 3.32% in October. Matos suggests that this indicates banking entities are adjusting to the forecast of easing Euribor rates.

The Euribor reached 4.02% in November, experiencing a slight monthly decrease after ten consecutive increases. This could potentially lead to improved negotiations between homebuyers and banking entities, which have been challenging until now. The President of the European Central Bank (ECB), Christine Lagarde, recently acknowledged that the first drops in official rates could occur in the summer.

However, the average interest rate in November remains 0.7% higher than the same period in 2022, reflecting an escalation that hasn’t been seen in eight years. The moderation in the average interest rate is primarily due to the slight decrease in the fixed rate, which was 3.53% in November compared to 3.57% in October.

Currently, 53.2% of mortgage holders prefer the fixed-rate option, while 46.8% opt for the variable rate, which slightly increased to 3.03% in November. Matos predicts a shift towards variable mortgages as financial entities continue to make them more affordable and fixed-rate mortgages tougher. However, due to the still-high Euribor rate, many families prefer the stability of a fixed-rate mortgage to avoid potential future payment increases.