During the first half of this year, 266,350 mortgages were signed. The National Institute of Statistics (INE) reports that 76% of these loans had a house as collateral. The first six months of 2023 mirror data from 2021 and 2019, the year before the covid outbreak, though the total is about 14% lower than the record-breaking six months of 2022. In short, activity remains solid by historical standards, but it cooled from the prior year’s peak, especially in sales.
Most industry observers view the half-year figures as decent. One executive notes that the period represents some of the highest volumes since 2011, calling the year-to-date performance surprisingly resilient in context. Richard Garriga, CEO of Trioteca, a leading mortgage broker, voices optimism about the underlying demand. Gonzalo Bernardos, a professor at the University of Barcelona and a prominent real estate economist, warns that some lenders are facing pressure and suggests banks may be tightening targets amid a softer lending environment.
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The Spanish Mortgage Association (AHE) offers a cautious take on the trend. AHE analyst Leyre Lopez notes that the market emerged from an unsustainable growth phase and expresses surprise at the magnitude of recent declines given a stable macroeconomic backdrop. This reflects a careful recalibration rather than a collapse in demand.
Reason for the rate increase
Santiago Carbon, Director of Financial Research at Funcas, explains that the drop in mortgage issuance is largely driven by higher borrowing costs, as rates rise, while banks strive to minimize defaults. Garriga adds that the Euro interbank rate has cooled housing purchases, and the pace of activity may slow as rates stay elevated.
Banking insiders point out that the contraction in new mortgages is also tied to households acting more cautiously and lenders being prudent about risk. Demand has softened as Euribor moved upward from 0% to about 4%, dampening enthusiasm compared with earlier months.
Bernardos projects that, at best, around 400,000 new mortgages could be signed in 2023. He notes that rising rates give banks greater income certainty and make them more selective about approvals. Still, he cautions that conditions could loosen later in the year if uncertainty persists and rate increases continue. Funcas remains cautious about a precise forecast, but expects a significant drop from the previous year if the current trajectory holds.
The Barcelona economist observes a likely dip in housing transactions and prices for 2023, driven by a mismatch between asking prices on listing portals and what buyers are willing to pay at closing. Higher rates enable buyers to negotiate lower prices, so a paused market is unlikely.
Funcas also predicts a modest fall in housing prices in 2023, while stressing that Spain does not represent a single market—urban centers may behave differently from other areas. The overall trajectory points to some softening overall, with regional variance.
Improving conditions
In the first half of the year, many Spaniards sought to optimize mortgage terms. In recent weeks, more than half of the refinancings recorded by Trioteca involved changes to existing loans rather than new borrowing. The trend shows a strong interest in adjusting terms to secure better conditions, according to Garriga.
Most changes are logged as new mortgages with the INE. Bernardos explains that banks often ask borrowers to cancel the current loan and open a new one to simplify processing and avoid prolonged administrative work. Estimates suggest around 40,000 new mortgages closed between January and June, many of which were refinancings of existing loans.
Even with a rebound in variable rates, the majority of new signings in January through June were fixed-rate products. INE classifies these as mixed mortgages with fixed coupons for five or ten years, linked to Euribor with a differential determined at the outset.
Trioteca reports that lenders continue to offer rates below reference levels for new loans. In August, fixed-rate housing loans averaged under 3 percent, while mixed loans started around 2.5 percent for the initial years, then gradually matched Euribor to keep payments accessible.
Beyond term adjustments, many homeowners opted to amortize either part or all of their loans. Banking sources describe a notable decline in mortgage balances during the first half of the year. The Bank of Spain has documented a tightening in mortgage balances since August 2022, with volumes dipping below 500 billion euros for the first time since 2006 in July.
The last sub-500 billion figure was seen in 2020, during the early stages of the health crisis when rates hovered near zero and Euribor was negative. Mortgage debt on Spanish households rose to over 511 billion before easing in 2022. The balance in the first half of 2023 points toward a continued decline, though not a dramatic one.
The Spanish Mortgage Association expects the outstanding balance to hold steady with a gentle downward trend as the year progresses.