The mortgage firm sinks 18.1% in March with an average rising interest rate that has already accumulated above 3% for a year
In March, the mortgage market shattered the signs of recovery shown at the beginning of the year. In the third month of 2024 the signing of loans for the purchase of a home It sank 18.1% compared to the same period of the previous year, a collapse that contrasts with the rebound registered in February and confirms that high interest rates continue to have a dent in the real estate sector. The average rate signed at the beginning of the mortgage rose to 3.41% and closed an entire year above 3% in March, something that had not happened since 2017.
According to data released this Monday by the National Institute of Statistics (INE), in the third month of 2024 A total of 29,653 loans were subscribed for the acquisition of a home, a figure that was far from the 36,182 signed a year before, which was the second best monthly figure in 2023. This is the lowest volume of operations recorded in a month of March since 2020, when 27,300 signatures were closed coinciding with the start of the pandemic.
“These data, close to 30,000 concessions, reflect a return to normality after years of boom of activity, since They are very similar to the figures recorded in 2019before the outbreak of the pandemic”, assesses María Matos, Director of Studies at Fotocasa. “In view of the evolution of interest rates, the current figures of the Spanish mortgage market fall within what was expected in a context of normality , so we do not see symptoms or signs of concern in the sector,” agree the General Council of the Official Associations of Real Estate Agents of Spain (Coapi).
It should be taken into account that this year Easter fell in March, unlike what happened last year, when it coincided with the first week of April. The slowdown in activity during holidays is usually reflected in a lower volume of mortgages granted, as also happens in December for Christmas and in the summer. “The significant variations reflect the lack of activity during the Easter seasonsince it had been eight years since the festival had taken place entirely in the month of March,” notes Matos.
Although we will have to wait for the next few months to see the market trend, The slowdown with respect to the dynamics of previous months is evident. After accumulating almost a year of year-on-year declines of over 15%, in January the decline in the mortgage firm slowed to 10.3%, thus marking the most moderate decline since the beginning of the previous year. That recovery continued in February, when the granting of loans for the purchase of a home grew for the first time in more than a year with a year-on-year increase of 3.8%.
“There is a part of decline that is explained by the context of high interest rates and a Euribor that still refuses to go down, which is less attractive for mortgage applicants,” explains the Director of Studies at Fotocasa. The average interest rate at the beginning of mortgages rose in March to 3.41%, the second highest figure since the end of 2014, only surpassed by the 3.46% registered in January. A year ago, in March 2023, the indicator was still close to 3%. Specifically, the average rate rose to 3.15% on variable mortgages and up to 3.64% on fixed mortgages, which continued to be the majority option chosen by 52.6% of new mortgage holders, despite losing ground .
In parallel, The sale and purchase of homes has undergone a similar evolution in so far this year. In January its decline moderated with a drop of just 2.1% compared to the same month of the previous year, while in February acquisitions even grew by 5.8%. On the other hand, in March they plummeted 19.3% with a total of 44,878 sales. This marked its biggest drop in the last six months and the second steepest since the European Central Bank (ECB) began raising interest rates in July 2022.
Waiting for the ECB
Along with the fall in mortgages and sales, the amount of money borrowed for the purchase of a home has also decreased slightly. Specific, The average amount of mortgage loans fell by 3.5% in March compared to the previous year up to 137,169 euros, with an average repayment period of 23 years. “It is logical that a part of the demand is postponing its decision to purchase a home, adjusting its budget downwards or looking for alternative ways while waiting for a more favorable mortgage financing scenario,” they point out from Coapi.
The real estate sector remains attentive to the movements of the ECB, which is expected to undertake the first rate cut at its next meeting in June since it began raising them almost two years ago. “The year will probably be differentiated between two marked stages, the one before interest rates fall and the one after. If the forecasts for de-escalation in rates by the ECB are confirmed, we will once again see how access to housing improves as the conditions for access to mortgage credit are lowered and how the demand that was kept waiting will return to the market with force,” predicts Matos, who predicts “a new mortgage war between financial entities to achieve the greatest number of sales possible.”
