Advance mortgage payments to alleviate the rise of the Euribor were stopped during the summer

2023-12-03 17:28:14

The unusual rate escalation interest rate sponsored by central banks to combat the inflation has caused a very strong increase in mortgage payments since the beginning of last year, which has led to families who could afford to repay part of their credits early to reduce your debt and stop the blow. The early repayments allow the quota to be reduced (thus pay less per month) or shorten the maturity period of the credit (which in the long run less interest is paid). This tendency to increase advance payments, however, began to show clear symptoms of slowdown during summer and the banks expect that this brake will continue in the coming months.

“In the third quarter, we have seen a some slowdown in mortgage prepayments: they were around 1,000 million euros, compared to 1,200 million in the second quarter, although year on year they continue to have a relevant weight in the mortgage portfolio. In the future, we hope that the trend keep slowing down. The logical thing is that a good part of the savings intended for prepayment of mortgages has already been used and therefore the availability to continue making prepayments continues to slow down in line with the economic context,” the financial director of the BBVA, Luisa Gómez Bravo.

In the same line, Matthias Bulachaccounting director of CaixaBankpointed out that extraordinary amortizations in his entity had risen from 500 million per month in 2022 to around 650 million in 2023, although “began to reduce a little bit” during the summer. “The fourth quarter of 2022 and the first and second quarters of 2023 was when the impact of the rate hike was most noticeable and notable and now, with the rise of the more consolidated yield curve, the impacts are beginning to be somewhat smaller,” he explained. Also Leopoldo Alvearfinancial director of Sabadellindicated that the prepayments in his entity were between July and September “even a a little below of the 2022 average”.

Less growth

The figures of Bank of Spain confirm this trend. The balance of mortgages was reduced by 3,598 million euros during the three months of the summer, despite the fact that new loans worth 13,172 million were granted, which implies that the Amortization -between ordinary and extraordinary- were 16.77 billion. This last figure is 1,002 million euros and a 6,3% superior to that of the same period of 2022, which represents a Brake with respect to the interannual increase registered in the second trimester (2,036 million and one 12,5%), which in turn was already lower than those of the first trimester (5,091 million and one 35,9%) and the quarter of 2022 (6,427 million and one 49%).

The aforementioned internal annual increase in amortizations of 6.3% that was recorded between July and September is, in fact, the lower since the fall they recorded in the last quarter of 2021 (-7%), when the ECB began to tighten monetary policy. Another way of looking at the slowdown that is occurring: the amortizations during the summer of 2022 were equivalent to 3% of the balance mortgage at the end of that June, they took a leap to the 3,8% during the fourth quarter of last year, and since then they have been falling to 3,7% In the first quarter of 2023, the 3,6% in the second and the 3,3% during last summer.

Surplus savings

The data does not seem to indicate that families are running out of savings. According to the INE, its gross disposable income grew by 12.2% in the second quarter, more than its spending on consumption (5.2%)with which the saving that they generated (50,298 million) rose up to 20% of their disposable income, compared to 14.7% in the first quarter. Besides, his financial wealth -difference between savings and debts- increased by 3% during the second quarter compared to the first. According to the Bank of Spain, families had financial assets worth 2.75 trillion euros and liabilities of 756,419 million at the end of June, with a positive balance of 1.99 billion. Most of his savings were concentrated in cash and deposits (1.03 billion, 0.7% more than in the first quarter) and shares in companies and funds investment (1.24 trillion, 2.4% more).

The slowdown in the rise in amortizations, according to various financial sources, has more to do with the fact that most of the families who could afford to prepay part of the mortgages to alleviate the blow of the Euribor have already done so, while other households do not have resources enough. Furthermore, they emphasize that total savings are not the same as surplus savings (those who are not dedicated to investing or having a security cushion for unforeseen events). According to data from the Bank of Spain, precisely, the families with more income, and therefore more resources available, have repaid up to 1.6 times more in advance than the less well-off. It is also pointed out in the sector that the year-on-year differences in euribor are every time more containedwith which the increases in installments are increasingly moderate, which reduces the incentive to repay early.