less growth
Rapid rate increases driven by central banks to fight inflation have pushed mortgage payments higher since the start of last year. Some families are choosing to repay loans early to cut debt and reduce monthly payments, or to shorten the loan term to lower long-term interest. Yet the momentum behind early repayments is fading. Banks expect the slowdown to continue through the summer and beyond.
In the third quarter the trend softened: mortgage prepayments reached around 1.0 billion euros, down from about 1.2 billion euros in the second quarter, with its share in the mortgage portfolio also easing. The belief remains that a portion of savings already earmarked for prepayments will be used gradually, keeping the pace of extra repayments in line with evolving economic conditions. This perspective was shared by BBVA spokesperson Luisa Gómez Bravo.
Similarly, CaixaBank accounting manager Matthias Bulach noted that extraordinary depreciations increased from 500 million per month in 2022 to roughly 650 million in 2023, but began to fall in the summer. The fourth quarter of 2022 and the first two quarters of 2023 showed the most noticeable effects of rising rates, while the newer, more stable yield curve has helped to soften the impact. Sabadell’s Leopoldo Alvear, the financial director, added that prepayments in his institution were around the mid-year period July to September and were slightly below the 2022 average.
less growth
Data from the Bank of Spain confirms this trend. Even with new loans totaling 13.172 million, the mortgage balance decreased by 3.598 million euros in the summer quarter. Depreciations, both ordinary and extraordinary, reached 16.77 billion euros. This figure was 1.002 billion euros and 6.3 percent higher than the same period in 2022. The slowdown in yearly increases in the second quarter, which rose by 2.036 million and 12.5 percent, was already lower than in other periods. First quarter figures showed a rise of 5.091 million and 35.9 percent, and 2022’s quarters showed even larger gains.
The annual increase in depreciations from July to September stood at 6.3 percent, a pace more modest than the decline observed in late 2021. The European Central Bank started tightening monetary policy around that time. Another way to view the slowdown is to compare summer 2022 depreciations with earlier levels. In June 3.8 percent of balances took a mortgage step, while the fourth quarter of last year and the following periods have shown a continuing retreat, dipping to 3.7 percent in the first quarter of 2023, 3.6 percent in the second, and 3.3 percent into the last summer.
More savings
The data does not indicate that families are running out of savings. The National Institute of Statistics reports that gross disposable income rose by 12.2 percent while consumption grew 5.2 percent in the second quarter. Savings helped support a production rise to 50.298 million and a higher share of disposable income, moving from 14.7 percent in the first quarter to 20 percent in the second. Financial wealth, defined as the balance of assets minus liabilities, increased by 3 percent in the second quarter. Bank of Spain figures show households held financial assets of 2.75 trillion euros against 756.419 billion euros in liabilities as of the end of June 1.99 trillion was held as cash and deposits, while investment in companies and funds totaled 1.24 trillion, up 2.4 percent.
Various financial outlets note that the slowdown in depreciations owes much to households who can afford a down payment. Some mortgage holders have already used this option to cushion the Euribor impact, while others lack sufficient resources. The total level of savings is not uniform, with excess savings concentrated among higher income households who paid more upfront than their less wealthy peers. Data also show sectoral differences from year to year. Euribor continues to influence installment increases, which in turn dampens the incentive for early payments.