Raising interest rates over the past few years slowed the purchase of new mortgages and contributed to a noticeable drop in the provincial market. In the first ten months, the region recorded a 12 percent decline in home loans. Some buyers sought to minimize monthly costs through partial refunds, while others hoped for credit relief after fully paying off their loans.
INE’s latest statistics leave little room for doubt. The data cover January through October of the current year, showing 18,710 loan cancellations aimed at buying homes in Alicante, which is 2,900 more than the same period in 2021, before Euribor began its climb. An 18 percent rise in just two years does not merely reflect mortgage terminations; it signals a broader shift in how households manage debt when rates rise.
Experts note that many borrowers prioritized repayment when possible. Faced with the prospect of rising fees and slim profit margins for lenders, people chose to pay down or settle early as much as they could. The trend also aligns with savings behavior observed during the pandemic, when households built larger balances in current accounts after months of isolation and limited social activity.
This marks a clear departure from the pattern seen in years of negative rates. Mortgagors tended to keep funds rather than spend them, and continued payments did not substantially increase monthly costs for those who secured loans before 2013, especially for borrowers who could deduct up to 15 percent of their contribution. The math becomes more favorable for these households, reinforcing the appeal of carrying existing debt rather than shifting it.
In this dynamic, partial depreciation emerged as the most common form of adjustment, though INE data also show a meaningful uptick in total cancellations. The true rate of change may be higher, since many citizens do not record cancellations with the Property Register unless there is a plan to sell or transfer the property.
Less activity in new lending
Turning to new loans, 14,529 financing applications were approved between January and October to fund home purchases in Alicante, reflecting an 11.7 percent drop from the same period in 2022. The decline is tied more to higher mortgage costs than to a lack of demand, effectively excluding part of the population from the market as monthly payments rise to meet new price levels.
For example, in a province where the typical loan amount is around 106,000 euros, a mortgage priced Euribor plus 1 percent over 25 years is now increasingly being accepted. The monthly payment has risen from about 375 euros in December 2021 to roughly 603 euros today. That extra 226 euros per month translates to about 2,722 euros more per year, a figure not every household can absorb.
Calviño has expanded relief measures to benefit more families, offering relief even as some households face ongoing mortgage obligations. If Euribor trends downward to around 3.7 percent by December, many borrowers could see reduced payments. The savings would be the result of lower rates on variable portions and a potential easing of the overall cost burden for households with adjustable-rate loans.
In the current climate, lenders are responding with more competitive offers to attract business. Some institutions now advertise loans at rates below Euribor, particularly for borrowers with solid profiles. Fixed-rate portions in the loan package are commonly structured to reduce risk, with the remainder remaining variable. A typical approach covers up to 70 percent of loans, offering fixed rates between 2 percent and 2.5 percent for the fixed slice. This can be advantageous for lenders, as they still reward savings with comparatively favorable rates, and borrowers often purchase additional products such as insurance or investment funds from the same institution.