Banks reported in their first quarter results that higher interest rates, enacted to curb inflation, would influence loan demand, including mortgages, and would soon show up in statistics. And it did. Though the impact arrived a bit later than anticipated, the latest data released this Friday by the National Institute of Statistics show results for March. Signing of new home loans declined by 10.5 percent on a year-over-year basis.
Specifically, 1,499 mortgages were formalized, compared with 1,675 in the same period of 2022. While the decline is smaller than the nationwide drop of 15.7 percent, it remains noteworthy. It should be noted that the INE collects information from the Real Estate Registry, which introduces a short delay, as it is normal for about a month to pass from signing a mortgage to its registration. In this way, the figures reflect what happened at the start of the year.
Nevertheless, using the INE data as a reference, Alicante’s mortgage market still shows a positive balance in the first quarter, even at a minimum. In January through March, 4,822 loans were recorded, representing a 1.8 percent increase in financing for housing purchases.
In terms of business volume, the banks operating in the province issued mortgages totaling 154.8 million euros in March, with the average mortgage size at 103,300 euros, the same as in the previous year.
A real estate professional in Alicante
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INE data also indicate that most people continue to prefer fixed-rate mortgages, despite higher costs in this option. In fact, about 63.9 percent of all mortgages signed nationwide were fixed-rate at that time, though it should be noted that the statistic also includes mixed mortgages that start with a fixed initial tranche and later switch to a variable rate, which have performed better in recent months. Floating-rate loans accounted for the remaining 36.1 percent.
Regarding price, the initial interest rate for mortgages signed across Spain in March averaged 2.99 percent, a figure nearly one percentage point below Euribor’s current level, which now exceeds 3.8 percent. It is important to remember that these mortgages reflect market conditions at the time they were negotiated, meaning those tied to late autumn or early winter.
In this way, the market is beginning to reflect the policy stance of the European Central Bank and other central banks, which are raising rates to cool lending and steer the economy toward price stability. In this framework, construction remains a key sector, as its slowdown has a broad impact on the broader economy.
Mortgages in Alicante are expected to become more expensive as rates rise, raising questions about whether the local market will continue to fall or rebound due to its unique characteristics. Foreign buyers account for a significant portion of demand, maintaining a relatively high level of transactions despite other headwinds.
Autonomies reports that the sharpest decline in registered mortgages during March occurred in the Balearic Islands, down 31 percent; Madrid, down 23.7 percent; Castilla-La Mancha, down 22.1 percent; La Rioja, down 19.4 percent; and Andalusia, down 17.3 percent. The Community of Valencia saw a 6.3 percent decrease overall, while Asturias had only a 0.8 percent uptick in mortgage issuance.