Madrid
Updated:05/08/2022 01:47h
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The real estate market and, therefore, the mortgage market are experiencing their particular new ‘boom’ after the coronavirus crisis. During Covid-19 everything came to a halt but, once the restrictions started to be lifted, operations have not stopped growing, as have prices. And in this scenario, the bank has not remained on the sidelines but has been a main actor.
Loans from financial institutions for housing have grown by almost 6,400 million from January 2021 to February 2022. A striking trend, since no continuous increases were seen in the balance of mortgages that the financial sector has of its clients since 2008 , when it grew to more than 680,000 million euros. Currently, the balance is 515,847 million.
The figure has been greatly reduced since the bursting of the real estate bubble in 2008. And it has been now, after the Covid, when the data has begun to rise again. Why does this situation occur? There are so many new operations that they are even higher than the amortizations of the previous mortgages, when previously it was the opposite, that is, more money was amortized from the loans that were in progress than was signed as new credit.
Demand grows more than supply
The demand for housing, both new and second-hand, has skyrocketed after the worst of Covid-19, especially the first type. However, the supply of housing has not grown as much as expected. The Spanish banking supervisor has spoken about it. “The greater strength of the demand for housing compared to its supply translated into a new acceleration in average housing prices in the fourth quarter of 2021,” stated the Bank of Spain in its latest financial stability report. Why does the offer not meet expectations? Because the high costs of materials and the lack of labor in construction act as a handicap that “is leading to the slowdown and even stoppage of some works in progress.” Supply suffers, demand continues to rise and prices skyrocket.
And if prices shoot up, so does the mortgage balance, since new operations will not only grow in number, but also in amount.
Financial sources confirm that all banks are experiencing a mortgage boom like they hadn’t seen since the housing bubble burst. But that does not mean that the mortgage conditions that are being granted are the same as then. In fact, the Bank of Spain itself has ruled out that in our country we are in a new brick bubble, for the time being.
Thus, most entities are increasing their mortgage balance, since they produce more loans than their clients are repaying. Although there are exceptions, such as Banco Sabadell and Caixabank, where the total amount has been reduced since they had much more to repay than they were subscribing as a new loan. Even so, in all entities there is a Huge increase in mortgages, bar nonewith which the portfolio that brings together the entities is being renewed.
Early amortization
Financial sources also point out that there are clients who are repaying their loans early to try to get ahead of the conditions that come. And the more ‘old’ credits are amortized, the more weight the new ones will have. These early repayments are due to the intention of some consumers to avoid the rise in interest rates of the European Central Bank (ECB), which would arrive in the coming months and whose simple announcement already has an impact on the Euribor to which 80% are referenced of mortgages in Spain, that is, variable-rate mortgages.
In this way, The Euribor has already been positive in April for the first time since 2016, and that is why some customers who have been able to save are opting to ‘take out’ a mortgage early now that the index is still at low levels. Some analysis houses already predict that the Euribor could reach 0.5% this year.
In the mortgage market there has been a change in trend in the last two years that could now be reversed again. With the Euribor in negative, banks had been promoting fixed rates, pulling down their prices in the war between banks. In February, 73.8% of new fixed-rate housing loans were signed, when in 2015 only five out of every hundred were under this modality. Now that the mortgage index is already positive and will continue to rise, banks have chosen to change their strategy towards the variable rate. And the war between entities continues.
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