A “shy slowdown” in the mortgage market. That is the scenario that Juan Carlos Delrieu, director of Strategy and Sustainability of the Spanish Banking Association (AEB), has raised this Thursday at a real estate conference held in Madrid. The manager of the banking association has argued that in 2022 the prices of loans “have increased less in relative terms than the interest rates of the European Central Bank” (ECB). A situation that will change in 2023, which “will necessarily increase (the price of) mortgages and reduce demand.” The interest rates of the loans, he has added, will scale up to 4% or 4.5%.
Delrieu has highlighted that 2022 “has been almost a record year” for the market. The latest public mortgage statistics, released this Wednesday by the INE relating to last November (the data for the full year will not be released until February), point to the best year in the granting of housing loans since 2010. The volume of mortgages is 13 % above 2021, which was already a good year, and will far exceed (predictably, more than 25%) the data from 2019, the last pre-pandemic year. The employer’s representative believes that this behavior “is explained because the demand has tried to anticipate the rise in interest rates.” In other words, anticipating that the loans were going to become more expensive, many people have accelerated the decision to buy a home.
The change of course in the ECB’s monetary policy has been a fact since last July. In the second half of 2022, the euro regulator has undertaken four increases in the official price of money, which started the year at 0% and ended it at 2.5% (the current price, although a new rise is expected next next week). This was transferred to the Euribor, the indicator to which most variable mortgages in Spain are referenced, which went from being negative in January to being above 3% in December, which meant average increases for borrowers over 200 euros per month. Despite this, the INE placed the average mortgage rate in Spain at 2.55% in November (although it must be taken into account that public statistics usually reflect operations signed months before the reference month and the Spanish Mortgage Association itself placed it above).
The director of the AEB has stressed that in 2023 “the transfer of rates to the mortgage market will be more aligned, it will be less slow”, which will make loans more expensive and will lower demand. Inflation will also have a negative impact, which reduces the purchasing power of households, “and it is possible that the demand from foreigners will slow down.” Asked about the expectation of rates and Euribor, Delrieu replied that “the market assumes that the ECB could increase rates to around 3% or 3.5%.” That is, up to one point more than the current level. “This could be transferred to a Euribor that would be close to 4%”, he added, “but I think it is something that is also discounted and it will be difficult for us to see rates above 4% or 4.5%”.
All in all, the AEB expects “a reasonable slowdown, not a sharp adjustment” in the granting of mortgages for home purchases. His representative has justified that Spain has “positive conditions”, with average family savings still above the historical average, a market with “a fantastic degree of health, since only 8% of mortgages exceed 80% of the value housing” and more and more lenders opting for the fixed rate, which “protects them against rate increases”.
Delrieu has participated in a panel discussion on the residential sector within the framework of an annual meeting of the real estate sector organized by IESE in collaboration with Tinsa and Savills. In line with other participants, such as the employers of the Madrid developer Asprima, the AEB director stressed that the housing market “is not in a favorable situation, but it is not a drama either” and stressed that “the types of Interest rates are still reasonably low compared to what they have been in the past. But the degree of intensity of the coming slowdown, which all participants have taken for granted, has also been the subject of some debate. “The cycle is not the best”, has summed up Jorge Morán, vice president of the luxury housing developer La Finca, “we cannot stay with the situation that nothing happens”.
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