households

According to data published by the National Institute of Statistics (INE), there are barely three communities in which mortgages have increased compared to last year in the first quarter of the year. The Canary Islands is the one that leads with a rise of 6.4%, while the rise in Catalonia and the Valencian Community remains at a meager 1.8% and 1.4%. The decline at the national level drops to 5.8%, although there are falls as pronounced as that of La Rioja, where 34% fewer mortgages were signed or Cantabria, which has recorded a 22% drop at the start of the year.

However, despite this increase in the quarterly calculation of mortgages in the Canary Islands, this does not mean that the region is not feeling the effects of the rise in interest rates. Although in the months of January, February and March the number of credit firms to buy a house grew compared to last year – when the data was already very good due to the real estate boom that occurred then – the first symptoms are already beginning to be noticed deceleration. In March, 1,445 of these credits were established in the Archipelago. They represent 322 more than in February, with which the monthly growth stood at 28.6%. However, last March fewer loans were already signed in the Canary Islands than in the same month of 2022.

The amount of new mortgages also decreased in March. If last year the value of the loans was 187,000 euros, this year the figure falls to 163,000.

Even so, the situation in the Islands seems very different from that experienced more or less generally in the rest of the country, where 6,758 fewer notaries were already signed in March alone than in the third month of last year. How is it different? youAs real estate experts have been announcing for months, the slowdown in the sector that is expected for the coming months and that is already beginning to be noticed will not be felt as much in the Canary Islands, at least for now. The reason? The island real estate market has little to do with what exists in other regions of Spain. And although the rise in interest rates may have made some of the potential new owners postpone their purchase decision, the truth is that the demand has not decreased much in recent months.

EThe reason is that the Canary Islands have a very important foreign demand. Non-residents represent a fairly significant percentage of buyers. Specifically, in the first quarter and according to data from the College of Registrars, 28.3% of the homes that changed ownership in the Canary Islands ended up in the hands of foreigners.

Another factor that continues to make the acquisition of properties in the Archipelago very attractive is the high profitability of this type of investment., which is very substantial whether it is going to be used for traditional or tourist rental. A motivation that continues to push many buyers.

And finally there is the offer, which continues to be scarce in the Islands. With hardly any new constructions and with a limited number of second-hand homes coming onto the market, there is high competition among buyers. A situation that pulls up prices, while in other communities they begin to moderate.

This rise in interest rates, which has increased the cost of financing, including mortgages, is also being felt in the distribution represented by those that have been subscribed with a fixed rate and those that are variable. Before the escalation of rates, when cheap money was the norm, requesting a fixed rate loan was very advantageous. The banking entities promoted them because at that time with the Euribor in negative they were more beneficial.

Fixed or variable

Now, the situation has changed and the other option is beginning to be more advantageous. Thus, the weight of fixed-rate mortgages to finance home purchases continues to lose weight. Six out of ten of those signed in March are subscribed to this interest, compared to 36.1% of those with variable interest. This is the lowest ratio since May 2021.

In this way, variable-rate mortgages are gaining ground. The average interest on loans to purchase a home associated with a variable rate was 2.7% in March, while that of fixed rates rose to 3.1%.

The average rate stood at 2.99% in March and the term at 25 years. Last year the average interest – at the national level – was 1.80%. Clear evidence of how it is affecting the continuous rises that the European Central Bank (ECB) is applying as a recipe to try to tackle uncontrolled inflation.