In August, the number of mortgages taken out on homes in the Canary Islands experienced significant growth, increasing by 11.8 percent compared to the same month in 2022. This growth was notable because it marked the only region, along with Murcia, in Spain that had a positive annual rate, as reported by the National Statistics Institute (INE).
Furthermore, in the monthly data, the Canary Islands saw a remarkable surge in property loan signings, with a growth rate of 49.2 percent.
However, the overall picture in Spain was different. The country as a whole witnessed a decline in the number of mortgages for homes by 22.7 percent in August compared to the same month in 2022, with a total of 28,344 loans. This decline was accompanied by a continuous rise in the average interest rate, reaching 3.25 percent, the highest level since July 2016.
This decline in home loans in August extended the streak of negative growth to seven months, with the drop in August being more pronounced than that observed in July (-18.8 percent).
The total number of home loans recorded in August was the second lowest since January 2021, surpassed only by the figures from April of the same year when slightly over 27,000 home loans were taken out.
In addition to the decrease in the number of mortgages, the average amount of loans constituted for dwellings experienced a year-on-year drop of 4.6 percent in August, totaling 138,171 euros. The capital loaned also decreased significantly, falling by 26.2 percent to just under 3,916.3 million euros.
When examining the autonomous communities, Andalusia (6,046), Catalonia (4,472), and Madrid (4,139) were the regions that registered the highest number of loans for dwellings in August. Similarly, the regions where the most capital was lent for the constitution of loans on homes were Madrid (853.3 million euros), Andalusia (788.9 million), and Catalonia (694.6 million).
Interestingly, only two communities in Spain, the Canary Islands with an 11.8 percent increase and Murcia with a 4 percent increase, signed more mortgages for homes in August than in the same month in 2022. In contrast, other regions reported year-on-year decreases, especially Cantabria (-34.9 percent), Madrid (-31.4 percent), and Comunidad Valenciana (-30.6 percent).
Regarding month-on-month data, loans for dwellings fell by 3 percent from August to July, while the capital loaned experienced its most significant August decline since 2020, dropping by 6.6 percent.
In the first eight months of 2023, residential loans in Spain fell by 15.4 percent, accompanied by a 17 percent decline in the capital loaned and a decrease in the average mortgage amount by 1.9 percent.
MORTGAGE: THE INTEREST RATE REACHES ITS HIGHEST VALUE IN SEVEN YEARS
One notable aspect of this mortgage landscape was the interest rate, which reached its highest value in seven years. Following the European Central Bank’s interest rate hikes to combat inflation and the Euribor’s evolution, the average interest rate for total mortgage loans stood at 3.62 percent in August, reaching a level last seen in October 2014, with an average loan term of 23 years.
In August, 43.4 percent of mortgages on all properties were at a variable rate, while 56.6 percent were at a fixed rate. The average interest rate at origination reached 3.38 percent for variable-rate mortgages and 3.92 percent for fixed-rate mortgages.
For mortgages on homes specifically, the average interest rate was 3.25 percent, its highest value since July 2016, with an average term of 24 years. Compared to the previous year, the average interest rate for home loans had increased by 1.3 percentage points, marking the fifth consecutive month in which the interest rate exceeded 3 percent.
In August, 42.1 percent of home mortgages were taken out at a variable rate, while 57.9 percent were at a fixed rate. The average interest rate at the start was 2.89 percent for variable rate mortgages on dwellings and 3.54 percent for fixed rate mortgages.
The data presented above reflects the complex dynamics in the mortgage market in the Canary Islands and Spain, influenced by economic factors and interest rate policies.
