Home » Spanish mortgage market data published in Q4 paints a ‘party on’ picture

Spanish mortgage market data published in Q4 paints a ‘party on’ picture

Euribor december 2021

A summary of the Spanish mortgage market data released in the fourth quarter of 2021 – interest rates, mortgage values, and new mortgage lending volumes in Spain.

Mortgage interest rate

12-month Euribor (the base rate used to calculate interest payments on most mortgages in Spain) ended the quarter at -0.502 as a monthly average (chart above), compared to -0.496 the same month a year before, meaning a negative rate just 1% larger than it was 12 months before. Compared to November it was 3.1% larger and ended the year with two consecutive months heading further into negative territory.

As a result, borrowers in Spain with annually resetting Spanish mortgages based on Euribor would have seen their monthly repayments fall by around 30 euro cents per month for a typical €120,000 loan with a 20 year term.

When might mortgage interest rates start to rise? Not before the end of 2023 says the international ratings agency S&P. Despite consumer price inflation near 30-year highs in countries like Germany and Spain (6.5% in 2021 in the case of Spain) S&P forecasts that the European Central Bank will not start hiking rates up before the end of 2023. That suggests that property buyers will still be able to get low fixed and variable mortgage rates in Spain for the time being.

Spanish mortgage lending

spanish mortgage lending november 2021

There were 29,856 new residential mortgage loans signed in November, up 8% on last year, with an average value of 142,101€, up 1.9%, according to the Spanish Notaries’ Association. 

Year-to-date (first 11 months) there were 310,177 new mortgages signed in Spain, up 39% on the same period in 2020.

Comparisons with last year are distorted by the impact of the pandemic, so how does lending compare to the same period in 2019, before anyone had heard of Covid-19? LIke a stampede for leverage, with volume up 21% in November, and 24% year-to-date. The market is clearly bullish about mortgage-financed property investments, perhaps due to the high-inflation / low interest rates environment.

Mortgage lending by region

By region the November increase in lending was most pronounced in Madrid, the Canaries and Andalusia, all of which enjoyed double digit growth in November, and more modest in the Balearics, Catalonia, and the Valencian Community, as illustrated in the next chart.

spanish mortgage lending by region 2021

Compared to 2019, the small market of Murcia is going through the biggest post-pandemic bounce in lending, though all regions are growing strongly with the exception of the Balearics, where lending is only up around 5% compared to 2019. The overall picture from the latest notary figures is of strong growth in Spanish mortgage lending compared to the pre-pandemic year of 2019.

mortgages in spain 2021

Foreign demand for Spanish mortgages

Foreign demand for property for sale in Spain has also been growing both compared to 2020 and 2019 (up 43% and 8% respectively in Q3 2021, according to the Association of Spanish Land Registrars), and partly explains the boom in mortgage lending.

With clients from 40 countries in 2021 including Spain, broker Mortgage Direct reports that foreign demand for mortgages in Spain is growing robustly, and is still driven by traditional markets like the UK and Holland, although the tail end of the market is more diversified than ever. Borrowers from the UK, Holland, the US, France and Germany make up over 75% of the foreign market for mortgages in Spain, according to Mortgage Direct’s figures.

“Following a relatively quiet Q3 for our British clients, in Q4 we saw a surge in sign-up activity – 35% of the business signed up for by British clients in 2021 occurred in Q4,” says Katherine Walkerdine, a founding partner of the business. “In terms of other nationalities, there was also a notable increase in sign-up activity from Americans, but a significant drop in Dutch clients compared to Q2 and Q3.”

So foreign demand appears to be playing a part in contributing to the strong growth in Spanish mortgage lending we can see in the figures released in Q4 of 2021. 

SPI Member Comments

Leave a Reply

Facebook Comments