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March 20, 2017

Mortgage issuance in Spain increased by 14% in 2016

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Last year, 281,328 loans were granted for buying a real estate in Spain, with an average size of 109,759 euros, by 2.8% more than in 2015.

The issuance of mortgage loans for the purchase of houses and apartments in Spain recorded its third increase during 2016, after seven consecutive years of annual declines. Financial institutions granted to the population 281,328 new mortgages, which is by 14% more than were signed in 2015, according to data published by the National Statistics Institute (INE). However, it is worth noting that lending rates for home buying in Spain have slowed down compared to the previous year, when growth was by 20.8%, after a modest increase of 2.3% in 2014. Therefore, the Spanish real estate market has left behind the declines of 32% in the worst years of the economic crisis (from 2008 to 2012), but the number of mortgage loans is still far from the index that was registered in 2006, when it reached 1.3 million credits.

In addition, the average amount requested to finance the purchase of residential property in Spain in 2016 was greater than a year ago and amounted to 109,759 euros, which is 2.8% more than in the previous year, when the average mortgage was signed with the amount of 105,931 euros. "The average amount of loans has reached its annual maximum which was the result of a greater willingness of banks to lend money and of small growth of real estate prices in large cities," said Fernando Encinar, the head of the research department of the portal Idealista. Total capital amounted, thus, to 30.8 million euros, by 17.2% more than last year.

In addition to the increase in the number of operations signed and to the growth in the average mortgage amount, a decrease of the interest rate on mortgage loans was registered at the end of the previous year. In December 2016, this rate was 3.18%, which is by 5.8% less than in December 2015.

This decline, however, may be short term, as experts warn of a possible increase in interest rates due to trials that were held lately not in favor of financial institutions. "Since the beginning of this year, many banks have raised rates on their mortgages, both with variable and fixed rate. Recent court decisions on refund of mortgage costs will ultimately relapse on the final cost of these credits," pointed out Beatriz Toribio, the director of the research department of the portal Fotocasa. At least 20 mortgage loans have already raised their interest rates during the first six weeks of 2017, according to the study by CrediMarket, which compares the loan conditions of different banks and financial institutions.

At the same time, Fernando Encinar believes that the main challenge that will face the Spanish real estate sector in 2017 is "to maintain its growth and to observe how the rates of mortgage loans will react, since many financial companies have already started to increase them since January. This situation will particularly affect the loans with fixed rate, as their progressive increase may lead to a decrease in the total volume of mortgage loans."

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