The crisis has caused a permanent fall in the price of housing in Spain. The floors will continue to go down after doing it since 2007 between 30 and 40%. Despite the descent, very few homes are sold.
One of the reasons, beyond the complicated economic reality of families, is that banks grant very few mortgages. They have hardened the conditions and no longer “give away” the credits to buy a house. The sum of all these factors has caused that the amount of mortgages is now at levels of 10 years ago.
Banking has tightened conditions, raised spreads and added linked products This week showed the figures of the 2012 Yearbook of the Real Estate Registry Statistics of the College of Property Registrars. Thus, in 2012, the average amount of mortgages stood at 105,421 euros, 9.7% less than a year earlier, standing at 2003 levels.
Already in 2013, and according to the National Statistics Institute (INE), the number of new mortgages constituted for the purchase of housing was reduced in February by 7.5% year-on-year and added 34 consecutive months to decrease to 24,197 operations.
The average amount of a mortgage for the purchase of housing reached 103,626 euros in February, 1.9% less than a year before but slightly higher, by 0.7% than in January. Loan capital for mortgages on homes also evolved downwards in February to reach 2,507.4 million euros, 4.2% less than a month earlier and 9.2% less than in the same month of the previous year.
The Euribor goes down, the rates go up
But if it is not surprising that the amount of mortgages has returned to levels of 2003, it does the fact that interest rates are rising despite lowering the Euribor, which for the first time in its history has fallen below 0, 5%. According to the registrars, in 2012, the average interest rate of the new loans was 4.08%, increasing with respect to the last two years (3.72% in 2011, 3.37% in 2010) despite the important reductions of the Euribor.
With the consecutive decreases of the Euribor, the share of an average mortgage of 150,000 euros contracted a year ago would have to be reduced by around 70 euros per month, which represents an annual saving of around 750/800 euros.
Since 1990 no differentials have been found as high as what they see at this time A saving that will not benefit those who sign a mortgage loan at this time. Banks and savings banks are increasing the spreads that add to the benchmark index until they are currently at historic highs. As reported by the Organization of Consumers and Users (OCU), “since 1990 no differentials have been found as high as what you see at this time.”
Since the Euribor is trading down, banks have begun offering their clients mortgages referenced to another index, the IRPH, which has been trading at 3%. All this results in more expensive mortgage payments. The most curious thing is that IRPH was expected to disappear by the end of April, but now the Ministry of Economy has decided that it will remain “alive” until October.
But the crisis has not only affected the number of transactions that are closed but also the financial conditions of the new mortgages. As Bankimia explains, the new contracts contemplate shorter repayment terms -23 years on average in mortgage loans that sign the boxes and 21 years on average in the mortgages of banks-, higher spreads -at present it is almost impossible to find Mortgages with spreads below 1.5% – and a large number of linked products – insurance, pension plans, etc … – that make the final cost more expensive.