The best October in 18 years: mortgages reach record highs, but growth slows

BarcelonaMortgage lending in Catalonia reached a new high in October, with 9,025 mortgage loans granted, the highest figure recorded for that month since 2007. However, this growth in the number of mortgages, sustained uninterrupted for the past 16 months, shows the first signs of decline. Since July 2014, every month has seen double-digit annual growth – the largest being in October of last year, with an increase of 52.7% – and now the number of mortgage loans has grown by only 1.3% compared to October of last year. For Spain as a whole, the figures are similar: the number of mortgages granted for home purchases reached 51,198 in October, 0.6% more than a year ago. This growth is much lower than in recent months, placing the figure below 2009 levels, according to Mortgage Statistics data published this Wednesday by the National Statistics Institute (INE). This trend reflects the previous decrease in mortgage prices, although this process is already beginning to reverse towards the end of the year, and is expected to become more noticeable in the coming months.

Mortgages of 190,000 euros

In Catalonia, the average mortgage value has reached €190,000, the third highest value in the entire historical series, after growing by 12.5% compared to a year ago. This figure is explained by the increase in purchase prices, which have driven up the amount of the mortgage loan—normally 80% of the appraised value of the property. Thus, mortgage lending is growing much more in volume per loan (+12.5%) than in the number of loans (+1.3%). At a similar level to the loan trend, home sales grew by 3% in October, reaching 11,000 transactions. Comparing this figure with the 9,025 mortgage loans, it turns out that mortgages represent 82% of all sales.

In contrast, across Spain as a whole, the average mortgage stands at €167,080, 10.35% higher than a year ago, but slightly below the €171,612 recorded in September. "The fact that the average mortgage has decreased in October is very good news," the CEO of [unclear] points out. broker Trioteca mortgage, Ricard Garriga. The majority of mortgages were fixed-rate (61.3%) and the rest (38.7%) were variable or mixed.

Expansionary phase

Although growth in mortgage lending for homes slowed this October, it remains on the expansionary trend that began a year and a half ago, when lower interest rates started to impact the mortgage market. "The INE data shows a clear expansionary phase for real estate credit in Spain, especially in Catalonia. Comparing the cumulative figures between January and October allows us to identify a substantial increase in the number of mortgages and also an acceleration in the total amount granted," explains Gorgas in statements to ARA. Specifically, in the first ten months of the year, the number of mortgages granted in Catalonia was 73,174, while in the same period last year it was 61,476.

The big difference with the bubble

This growth in mortgages has gone hand in hand with the growth in sales: in the last year and a half, they have grown steadily – with the sole exception of August of this year, when purchases dipped briefly. Given the catastrophic precedent of the 2008 crisis, can we speak of a housing bubble again?

While transactions, mortgages, and prices grew unchecked during the 2000s, the key difference compared to that period is that now, although the number of sales and prices have reached or surpassed 2007 levels, the same cannot be said for mortgages.

These 9,025 mortgages signed in October of this year are still far from the 19,594 that were established in October 2006 or the more than 24,000 of March 2006.