Rising interest rates lead to the collapse of the mortgage company

The equation of rate increases faithfully fulfills the objective of the European Central Bank (ECB) to limit activities, at least real estate: interest rate increases at the historical rate; fewer home buying and selling operations; and, above all, the collapse of the mortgage company for financing the purchase of apartments and houses.

The number of home loans decreased by 18.3% last April compared to the same month in 2022, reaching a total of 27,053, the lowest figure since December 2020, when the economy was still burdened by the effects of the pandemic and the restriction of almost all activity that year, according to data that was announced this Thursday by the National Institute of Statistics (INE).

In Galicia, business fell by 19.7% on an annual basis up to 1,024 loans, with an average amount of 130,883 euros, 5.3% less than the one registered a year earlier.

Along with the fall in April, which is the most pronounced since January 2021 mortgage company on residential chains three months of negative rates after a 2% decline recorded in February and a 15.7% decline in March. In other words, each month that passes the decline in mortgage companies compared to the previous year is greater in the decline that is predicted to increase in the coming weeks as interest rates continue to rise to the current 4%.

At the same time, the average amount of mortgages on apartments fell by 4.1% on an annual basis in the fourth month of the year, to 136,945 euros, while the borrowed capital decreased by 21.6%, to 3.704 million euros.

On the other hand, the average interest rate for all mortgage loans in April was 3.43%, which is the highest rate since May 2015, with an average repayment period of 23 years.

In the case of housing, after the increase in interest rates adopted by the ECB and the increase in the price of Euribor, the average interest rate in April was 3.09%, more than 1.77% compared to last year and the highest since April 2017. The average term is 24 years .

38.7% of home mortgages were written last April at a variable rate, while 61.3% were signed at a fixed rate, the lowest percentage since April 2021 and 14.1 points lower than in July 2022, when it reached a maximum of 75.4%. The average starting interest rate was 2.78% for variable rate mortgages and 3.29% for fixed rate mortgages.

A few months ago, INE reviewed the statistical series of interest rates from January 2020 after launching a new procedure for checking the results of the initial average interest rate in mortgages placed.