2023-08-22 03:50:31
The bank’s mortgage business will contract this year as a result of the rise in interest rates and political-economic uncertainty. Home loan cancellations, both ordinary and extraordinary, are skyrocketing and will foreseeably exceed the new operations carried out in 2023. A situation that was common after the financial crisis, but that as a result of the pandemic (from 2020 to 2022) had been reversed as a result of the boom for the purchase of flats.
According to financial sources to THE OBJECTIVE, in 2023 the pre-covid situation will return if the trend continues as to date, since an improvement in mortgages is not contemplated between now and December. In January, due to the slowdown in recent months and the first blow of the increase in interest rates, there were almost as many total amortizations as contracts.
The latest data available, according to the Spanish Mortgage Association (AHE), reflect that until April 2023 the cancellations of these loans exceeded the formalized transactions. Thus, in the first four months of the year, the mortgages that had been discharged amounted to 207,373, compared to the 178,515 that had been constituted. Therefore, the difference is wide in said period, since the former are 16% higher than the second.
There were no more mortgage cancellations than originations since 2019
Since 2019, this problem has not occurred for banks, which have mortgages as one of the pillars of their income. So, the Spanish canceled 513,126 credits and signed 497,720 as a consequence of the natural maturities of the operations that were sealed at the time of the bubble, which were widely much more significant.
Currently, to this factor are added the extraordinary amortizations that the holders of the oldest loans are making to avoid the added cost of the meteoric rise of the Euribor due to the change in the ECB’s monetary policy to control inflation. This turn, which has led official rates at 4.25%has raised the average monthly installments that those with a variable rate mortgage have to pay above 1,000 euros (70% of the total).
The rise in rates is causing a collapse in mortgage activity in recent months, both in number and in amounts. In transactions, new originations plummeted 10% only until April. In financing, the entities estimate that, in the whole of the year, the market will fall between 20 and 35%.
The higher early repayments, which are leading to a progressive boost in mortgage cancellations, are possible thanks in part to the savings that Spaniards accumulated during the pandemic due to mobility restrictions. A piggy bank that at times has shown signs of weakness due to the escalation in prices since Russia’s invasion of Ukraine.
The banks are aware of the environment in which the real estate market moves and the business is not only contracting due to lower demand. Entities are tightening the approval criteria for new mortgages to be more cautious and prevent future defaults. The financing restriction is pronounced mainly in high-risk operations, those in which the loan covers more than 80% of the appraisal of the property.
For the moment and despite the increase in fees, delinquency in the system continues to be controlled. To date, the vast majority of citizens can afford the high cost of their mortgages. Experts and the sector, however, anticipate an increase in payment problems after the return of the holidays, although it will not be very general.
The entities anticipate a slight increase in insolvencies from September, but they rule out that there will be a wave of them. And less in the segment of housing loans, since they are the last to stop paying. In the first place, the advance of doubtful debt will be registered in consumer credits.
The rise of the Euribor, in the same way, has led to the negotiation of the conditions of the mortgages has skyrocketed, in order to achieve a reduction in the installments. Financing with changes has tripled in the first six months of the year. Banks are prone to these modifications so as not to have to deal with the feared delinquency, a key point of its control to this day.
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