The average interest rate on mortgages falls to 3.27% in the first 'puncture' of its rally
Housing - Real Estate The average interest rate on mortgages falls to 3.27% in the first 'puncture' of its rally Firms fell 19.1% year-on-year in their 10th consecutive month of declines A more favorable scenario opens up for the buyer to negotiate the loan Cancellations (36,489) continue to outnumber new signings (32,645) Signing the terms and conditions of a mortgage. Photo: EP Photo: EP
Maria Medinilla 2024-01-25 - 9:12 AM Updated: 10:18 AM - 1/25/24 Mortgages reaped their tenth consecutive month of declines in November with a year-on-year decrease of 19.1% and 32,645 signatures. Both figures improve on the performance of previous months and so does the average rate, which fell five tenths of a percentage point from October to 3.27% to post its first fall so far this year since the bullish rally began in January 2023. The weight of high interest rates is still felt in the number of cancellations (36,489), which is still above that of new items, although the change in trend opens up a more favourable scenario for the buyer to negotiate the loan.
We will have to wait until 2024 has a bit of a run-in to see a change in trend. This is the most widespread scenario in the sector shared by Juan Villén, CEO of idealista/hipotecas: "It will probably not be until the beginning of this year 2024 when we will begin to see how this downward process is being dampened". Before that happens, the previous scenario does show signs of improvement. "The mortgage firm has already been stabilizing for three months with a volume of more than 31,000 operations, after the European Central Bank paralyzed the escalation of interest rates," says María Matos, Director of Studies at Fotocasa. If the context of rates is cancelled out and the figures for 2023 are compared with those for 2019, the real estate sector shows "great resilience", says Matos after November's data, which represents the lowest number of firms this month since 2020.
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At what age can I retire with 15 years of contributions? It should also be borne in mind that the percentage drop in mortgage signings, despite extending the time of declines, had not fallen below 20% since July, in another demonstration of the sector's attempt to eat ground on the declines.
The interdependence between mortgages and home sales (it has also accumulated 10 months of year-on-year declines) is a factor to be taken into account, according to the expert: "Undoubtedly, the downward trend will mean a boost in the dynamization of mortgage activity, although always taking into account the evolution of real estate transactions, as a further drop in the number of sales would have a direct impact on the volume of mortgage transactions." It does not seem, however, that 2023 will be remembered as a bad year for property rights transfers since, in terms of volume of operations, it is confirmed as the best year since the boom of 2007.
The tentacles of the monetary policy carried out by the European Central Bank (ECB) to try to contain inflation and the evolution of the Euribor (at 4.02% in November) continue to be felt in the sector. The average interest rate was 3.27%, seven tenths more than a year ago. Despite the fact that it has been above 3% for eight months, this is the first time it has registered a decline since December 2022, when the indicator began the climb that led it to set an eight-year record in October 2022 (3.32%). The halt in the average rate is also indicative that "banks are also beginning to adapt to the forecast of moderation in the Euribor," says Matos.
46.8% of home mortgages were at variable rates (with an average interest rate of 3.03%) and 53.2% at a fixed rate (an average of 3.53% at the beginning). The scenario of a gradual fall in the price of money will open up more options for consumers to negotiate mortgages.
The cancellations are also a reflection of the situation that mortgage firms are going through, and since February, they have outnumbered new firms.
According to data updated on Thursday by the National Institute of Statistics (INE), the average amount of mortgages on homes fell by 0.5% year-on-year in the penultimate month of last year, to 145,894 euros, with an average term of 24 years.
Despite the connection between the statistics of home sales and mortgage signings, there is one element in which the paths differ: the profile of the buyer. While transfers are holding up due to the lack of stock to cover demand and the buyer's profile shows more solvency, the mortgage firm does suffer from the new price of money and this translates, according to data from Fotocasa, into 40% of buyers exploring new ways of acquiring housing and dispensing with the need for mortgage loans.
