Mortgage activity hints at possible recovery in housing market

A slight improvement in the monthly number of new mortgages sold in March has prompted optimists to call the bottom of the Spanish property market. Though the number of new mortgages signed in March fell 25.5% compared to the same time last year, the rate of decline appeared to slow compared to monthly falls of between 30% and 46% since November last year.

Furthermore, the figures, from Spain’s National Institute of Statistics (INE), show there were 52,439 residential mortgages signed in March, an increase of 1.2% on the number signed in February, which in turn was slightly better than January.

That was enough for leading national papers like El Pais to suggest that the Spanish property market might have touched bottom in recent months.

But that is also where the good news ends.

On a year-to-year basis new mortgage approvals have fallen for 21 months without a break, and residential mortgage approvals in the first quarter of this year are 36% lower than the same period last year.

The value of the average residential mortgage signed in March was down 16% to 119,067 Euros, 3.7% lower than in February.

Value of average residential mortgage in March '000 Euros

Value of average residential mortgage in March '000 Euros

That means that not only are far fewer mortgages being signed than a year ago, but they are also declining in value. Put those together and you have far less money to spend on property, which puts brutal downward pressure on property prices.

To put it another way, the overall value of new mortgages signed in March was down 37.4% to 6.24 billion Euros compared to the same time last year.

Spanish mortgage interest rates still rising

Mortgage interest rates are still rising too, despite a dramatic fall in base rates of 58% since March last year. The average mortgage rate agreed in March was 5.10%, an increase of 0.4% compared to a year ago, but a change of 5.6% compared to February this year.

Average mortgage interest rate in March

Average mortgage interest rate in March

About Mark Stücklin

Mark Stücklin is a Barcelona-based Spanish property market analyst, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on All articles published in good faith as a general guide but no substitute for professional advice. Please read the SPI disclaimer

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