The fear of high indebtedness left by the last great crisis is beginning to dissipate among families, given the favorable financing conditions allowed by the low interest rates caused by an environment of broad monetary stimulus. For the first time in a decade, households have exceeded the average 24-year term for repaying mortgages.
Despite the fact that the period of indebtedness has not yet reached the levels prior to the last great crisis -in 2008 it reached almost 27 years on average for the payment of real estate loans-, in recent years there has been a increase in the life period of the new loans contracted to reach the highest levels this year since 2011, with an average of 24.6 years.
In fact, the Spanish Mortgage Association (AHE) highlights in its latest report that, according to the evolution of recent years, it is observed that “both the average debt and, to a lesser extent, the contractual term of mortgage operations has been showing a trend growing “, although with an inverse result on the mortgage payment.
Specifically, the average amount by which families borrow when buying a home has also been rising since the last major crisis ended. In 2013, still in the midst of a recession, banks lent an average of € 100,011 for the purchase of a home, this being the lowest level since the last decade.
In the first period of 2021, the average mortgage amounts to 132,700 euros, 32% more than then . “Despite showing a slight decrease of 2% compared to the previous quarter and 5% compared to the previous year (period affected by the specific constitution of numerous mortgages of large capital), it maintains an upward trend in parallel with the sale market “, they point out from the association.
However, despite the fact that families are getting more and more indebted, the monthly mortgage payment continues to fall due to this lengthening of terms, low interest rates and the mortgage war that the entities maintain. During the first months of this year, the average fee paid by users for new mortgages was set at 540 euros , 3.23% less than at the end of 2020.
The difference is greater if this quota is compared with the average that households paid before the outbreak of the great recession. In 2008, the average monthly payment stood at 952 euros per month, then marked by the weight of variable mortgages compared to fixed mortgages and conditioned by the Euribor, at a maximum in that year, at 4.49%. Currently, the Euribor is negative at 0.5%.
At the end of the first quarter of the year, 51.7% of the new mortgages constituted were at a fixed rate , 20.3% at a mixed rate, while 28% were at variable interest. In 2013, the last year for which the AHE collects figures, the trend was totally inverse. Fixed mortgages were testimonial, representing only 1.1% of the portfolio, mixed mortgages accounted for 31.2%, while variables took the leading role, weighing close to 68%.
In fact, there are already several financial groups that recognize the greater weight of the sale of fixed mortgages compared to the variables. Specifically, 85% of the new loans for housing in Sabadell are fixed; 66% in the case of CaixaBank , and 58% and 56% in the case of Santander and Bankinter , respectively.
Despite the interest, not only from homes but also from banks, for the sale of fixed mortgages due to the low rates, prices are lower than ever, reaching only 1.5% APR in some entities such as Ibercaja or Evo Banco. According to data from the Bank of Spain, the average APR at which the bank marketed mortgages last July was 1.55%.
This is the lowest historical interest since the agency collects data. In fact, neither in the worst moments of the pandemic, when mortgage production fell by 50% due to total confinement, nor in the worst years of the last great crisis did prices touch such a low level.
Currently, Spain already sells mortgages that are cheaper than the average for the euro zone . In July, the average APR given by banks operating in the European Union stood at 1.61%. This situation has been reversed recently, with June 2021 being the first month in which Spanish mortgages were kept at lower prices than European mortgages, since the trend has always been the other way around.