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One in three homes bought without a mortgage
Thursday, February 15, 2024 @ 6:22 PM

MORTGAGE-LENDING has reduced dramatically in Spain in the past year, but that has not stopped homes on sale being snapped up: Over a third were purchased in cash, according to the latest figures.

Eurozone interest rates soaring since the end of 2022 mean homebuyers who need a loan are tending to hold off for the time being, preferring to wait until these fall again – once the European Central Bank (BCE) considers inflation is sufficiently contained to do so.

Until mid-2022, with the Euribor having been in negative figures since February 2016, mortgages were cheaper than they had ever been – property prices continued to rise, but buyers could get far more for their money.

In fact, that year saw a record high in the number of variable-rate mortgages granted in Spain – 73% of loans signed for in June 2022, according to the National Statistics Institute (INE).

Figures for the 2018 year end showed variable-rate mortgages made up 62.8% of the total, but with the Eurozone interest rate remaining below zero, consumer confidence began to grow as more time passed.

Variable rates have long been the default in Spain and, as mortgages are reviewed annually, homebuyers automatically get a one-year fixed rate and do not need to worry about sudden rises from month to month.

By November 2023, fixed-rate mortgages had overtaken variable rates, at 53.2% compared with 46.2%, and the number continues to climb.

Whilst property purchases have reduced in number as a result of the interest rate hike, the market has not stagnated – a combination of buyers who are confident the Euribor will fall again to manageable levels and decide to forge ahead in the meantime, and the high number of home-seekers who can afford to buy outright, mean the market remains at least stable.

The INE reveals that, from January to November 2023, a total of 353,633 mortgages were granted for the 550,215 property purchase transactions registered – a total of 64.81%, meaning 35.19% of homes were snapped up by cash buyers.

And although mortgages were involved in 71.5% of property purchases in 2019, before the pandemic forced a dramatic slowdown in sales – meaning 28.5% were bought without a loan – the number of transactions was lower than in 2023, despite the Euribor increase.

INE figures show that 505,467 residential properties were sold in 2019, involving 361,291 mortgages.

Estate agencies have reported a 'notable cooling off' in 'buying fever', although the figures appear to show differently – more homes sold, but with cash purchases gradually gaining ground.


How the Euribor has evolved

The interest rate set by the BCE for all countries using the common currency – the euro – first rose above zero in April 2022 after six years and two months in negative figures, but the change was not dramatic – from the record low of -0.502% in December 2021, it had increased to 0.013%, meaning the difference in monthly repayments to the average borrower was just a few euros.

But within eight months, it had broken the 3% barrier for the first time since December 2008.

Another seven months on would see the 4% frontier shattered – July 2023 closed on 4.149%, and October brought a new record of 4.173%.

Prior to 2023, the last time the Euribor was above 4% was in November 2008, after five months above 5% - including the highest-ever figure of 5.393% in July that year – and, from that moment on, went into a drastic downward spiral.

Before the 2022 rises, the last time the Eurozone interest rate was 2% or more was December 2011, and it remained under 1% from August 2012 for almost a decade.



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