Number of new mortgages plummet in Spain: Bank loans fell by 30% year-on-year in September

HIGH interest rates are continuing to reduce the number of new home mortgages, with a 29.6% annual fall in September.

Figures released on Tuesday from the National Institute of Statistics showed 31,054 loans were granted two months ago as interest rates averaged 3.26%.

The figures are compared to 2022, which was a boom year, and mortgage loans are now back to where they were before the Covid pandemic.

Last year saw 463,614 mortgages granted- the highest total since 2010.

Juan Villen of Idealista Hipotecas said: “This trend will continue for the remainder of the year, although it is foreseeable that the drop in deals compared to the previous year will soften in the final part of 2023.”

Credit to buy a house is expensive and difficult to obtain as a result of the interest rate increases made by the European Central Bank that started in July last year and a Euribor rate of above 4%.

The increase in the cost of new mortgages therefore makes financing prohibitive for a large number of people.

The average interest rate on loans taken out in September – with an average term of 24 years – continued to rise, rising by more than one point from a year earlier, to 3.26%- the highest figure since February 2016.

It is the sixth consecutive month in which the interest rate has exceeded 3%.

The most immediate consequence is that sales and mortgages have been decoupled since the beginning of the year and not all buyers sign a mortgage.

Almost half of all sales are paid in cash, according to the Council of Notaries.

Although fewer mortgages have been taken out than a year earlier, the amount of these loans has remained stable.

The average amount fell by 0.1% year-on-year in the ninth month of the year, to €143,186, while the capital lent decreased by 29.7% to €4.4 million.

All of the regions reported annual variation rates in the number of mortgages signed in September, with the biggest drop in Murcia, where loans granted fell by 44.8% followed by Aragon (-39.0%) and Galicia (-38.2%).

The most mortgages granted were in Andalucia (5,900), the Community of Madrid (5,854) and Catalunya (5,291).