Mortgage renegotiations soar to all-time highs amid unprecedented rate hikes

MADRID, 5 Jun.

Mortgage renegotiations soar to all-time highs amid unprecedented rate hikes


Mortgage loan renegotiations shot up in April to all-time highs, according to data released this Monday by the Bank of Spain, in a context in which the rise in interest rates that has occurred in recent months to an unprecedented pace.

In the fourth month of 2023, the changes in mortgage conditions covered loans for a value of 2,503 million euros, which is the highest monthly level for this type of operation since the Bank of Spain began to offer this data in January 2015.

In fact, only the April data is already larger than all the renegotiations that took place in 2022 (1,910 million), 2021 (1,744 million), 2019 (1,318 million), 2018 (1,744 million) and 2017 (2,357 million). Instead, it is below the renegotiations registered in 2020 (2,605 million), 2016 (6,396 million) and 2015 (9,241 million).

The renegotiations may include modifications in the terms, in the interest rate or change from fixed to variable interest rate. The bulky change in the renegotiations occurs in a context in which the European Central Bank has carried out the fastest rate hike in its history. This has taken the Euribor to its highest since 2008.

In fact, mortgages signed at a variable rate have experienced increases in the interest rate they pay over 3.8 percentage points during the first three months of the year. This means increases of approximately 300 euros per month for an average mortgage, although depending on the maturity period and the capital, the increase can be much higher.

Counting the rest of the operations, the mortgages signed in April reached 6,231 million euros, which is the highest level since July 2022, as well as an increase of 16.1% compared to the month of March.

By maturity period, mortgages signed in April with less than one year to maturity were 2,456 million (39% of the total), while maturities between 1 and 10 years accounted for 22%. Negotiated loans for home purchases with a maturity period of more than 10 years stood at 2,386 million euros, 38% of the total.

The new operations signed in the fourth month of the year could not offset the early repayments, so the outstanding balance of the mortgage portfolio of the Spanish entities as a whole was 504,355 million euros, its lowest level since January 2021, which in turn, it was the lowest level since before the 2008 crisis.

Regarding the price, the weighted average interest rate of the operations signed in April was 3.48%, seven basic points less than in March. This drop is due to the fact that the interest rate for renegotiations fell by 19 basis points, to 3.29%, while that for other operations rose by five basis points, to 3.60%.

By maturity terms, the interest rate at which mortgages with less than one year maturity were signed was 3.47%, while with terms of more than a decade an interest rate of 3.09% was registered.

Thus, the weighted average rate of the outstanding balance of the Spanish mortgage portfolio was 2.86% in April, 16 basis points more than in May. Compared to April 2022, the average rate has risen by 1.72 percentage points.