Home Mortgage Activity in Spain Jumps in July

The number of home mortgages issued in Spain in July jumped 28.8 per cent from a year earlier, the strongest evidence yet that banks are tentatively starting to re-enter the home sales business.

On a monthly basis, the volume of new mortgages reached 18,107, a 5.7 per cent increase from June, according to the new INE (National Statistics Bureau) data. INE describes the 5.7 per cent monthly increase as “the greatest recorded in this period”.

But the most impressive number may be this: the capital loaned on home purchases jumped to more than €1.8 billion, a hefty 28.5 per cent increase from 2013. That’s also an 8.1 per cent increase from June, which was also “the greatest recorded in this period”.

This is certainly welcome news for the industry. Mortgage lending is one of the key variables to watch for the first signs of a recovery in the wider Spanish housing market. Without renewed mortgage lending the middle class can’t afford to buy property, even with house prices down 50 per cent or more.

The fact that banks are starting to lend again also provides a good barometer to pricing levels, as bank’s signal they are starting to see property as good collateral for loans again, and do not expect prices to fall much further.

But any analysis of the percentage volume increases must start with a reminder that the results reflect an almost non-existent mortgage market a year ago. And the July increases were not enough to bolster the year-to-date volume, which is still down 9.4 per cent from a year earlier, although up 1.3 per cent in value.

The data also suggest lenders are still focusing on low end deals. The €100,866 average was a slight 0.3 per cent below July of 2013, although up 2.3 per cent from June.

As usual there were large variations in the performance of different markets. Madrid notched a 48.8 per cent increase in the number of mortgages registered from a year ago and Andalusia posted a 43.9 per cent surge; but Murcia saw only a small 6 per cent increase and the Balearics saw a slight 3 per cent rise.

Although those inconsistencies illustrate the continued weakness in many regions, the INE data will certainly add steam to the housing recovery story. But we are going to have to wait for upcoming reports to determine if this a real trend, or simply a temporary blip.