The war and the Euribor threaten the frenetic pace of mortgage activity

The number of signed mortgages advances 20% in an explosive first quarter in which the outstanding balance of loans in the sector improves to almost 513,000 million euros.

The banking mortgage business has had an explosive first quarter of 2022. With the culmination of the 43,378 mortgages for house purchase signed in March, the highest monthly figure since February 2011, the first three months of the year total 116,100 operations. The figure is 20% higher than the same period in 2021.

If this progression were to continue, mortgages signed would far exceed the more than 417,000 for all of last year and jump to the highest levels since 2010.

The figures are spectacular. According to the latest data from the National Institute of Statistics (INE), in the quarter the bank has granted loans worth 16,616 million euros, around 30% more than a year earlier. A strong increase caused both by the increase in activity and by the average amount of mortgages, which in March was 145,715 euros, compared to 137,729 a year earlier.

The circle of an almost perfect quarter closes with an increase in the outstanding mortgage balance of Spanish banks, which continued to produce new mortgages for an amount greater than those that are amortized. The Bank of Spain estimates the outstanding balance at 512,809 million euros, compared to 511,346 million in 2021.

This set of figures barely includes the impact of the war in Ukraine, which began at the end of February and did not affect the operations that were already pending signature. And they do not fully include the impact of the rise in the Euribor, which is causing very significant changes in the showcase of bank mortgage offers.

The main indicator to set the price of mortgages closed the 2021 financial year at -0.502%, very close to its historical lows, but in March the Euribor had already risen to -0.237%. In April it entered positive and this month of May it has jumped above 0.360% in the daily rate, taking the provisional monthly average to the highest level since 2014. Different firms agree in their forecast that the Euribor will comfortably exceed the level 1% next year.

The rise in interest rates, the armed conflict in Ukraine, the ongoing economic slowdown and the sharp rise in house prices in Spain challenge the continuation of the strong growth rate of the mortgage business in the remainder of the year.

But analysts do not expect sharp changes. "Mortgage purchases will probably remain stable, and will vary at the rate of purchases," says Fotocasa. For its part, Idealista highlights that the vigor of the can be maintained at least until the summer, although it warns that "the recent sharp increases in the price of fixed mortgages are not yet reflected" in the March data. Most entities have raised the prices of fixed loans to levels between 2% and 2.5% APR, jumping up to 3% in some cases.

At the same time, banks are making their variable loans more attractive -see attached table- in the midst of a rally in the Euribor, the index to which the vast majority are referenced.