PROPERTY SEARCH

Date Published: 19/04/2023

ARCHIVED - Almost 70 per cent of homes sold in the Region of Murcia are paid for up front

ARCHIVED ARTICLE -

Home buyers in the Region are turning to lump sum offers due to high mortgage rates and inflation

<span style='color:#780948'>ARCHIVED</span> - Almost 70 per cent of homes sold in the Region of Murcia are paid for up front

Rising interest rates have led to a significant shift in property purchases in the Region of Murcia, with almost 70% of all homes bought in February paid for up front, rather than with a mortgage.

According to the latest data from the General Council of Notaries, of the sales signed off in the second month of 2023, only 31.7% were financed by a mortgage.

The same sort of figures are reflected across Spain, with only 42.5% of the total transactions paid for with a mortgage, the lowest figure since the end of 2017.

For Juan Villén, Managing Director of idealista/hipotecas, the explanation is very clear: "The rise in interest rates has driven purchasers who no longer meet the banks' risk criteria out of the market."

"This can be seen perfectly well because the fall in sales transactions is much lower than the fall in mortgages. In other words, in absolute numbers, almost 100% of the fall in sales and purchases is due to a lower number of mortgages," he said.

Iñaki Unsain, real estate expert and former president of the Spanish Association of Real Estate Personal Shoppers (AEPSI), also points to the rise in interest rates, which have gone from 0% to close to 4% in less than a year.

"Many people no longer have sufficient solvency to be able to make the mortgage repayments. That is why the number of mortgages has fallen drastically. It is also influenced by the fact that over the past year a lot of hasty purchases have accumulated to take advantage of the low interest rates."

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The Euribor, short for Euro Interbank Offered Rate based on the interest rates at which a panel of European banks borrow funds from one another, is close to 3.7% in monthly rate, the highest since the end of 2008.

This is causing a sharp rise in the price of variable-rate mortgages.

Meanwhile, most fixed mortgages now marketed by banks have an interest rate above 3%, according to the idealista/mortgage comparator, which has reduced some of their attractiveness to consumers.

In the case of mixed mortgages (which include a first fixed tranche that is then converted into a variable unit), most offers are above 2% in the fixed tranche.

According to Carlos Smerdou, CEO of Foro Consultores Inmobiliarios, the weight of home sales without mortgages has been growing for some time.

"This is due to the worsening financing conditions for mortgage loans and also to the low profitability of investment funds and the volatility of the stock market.

"The financial savings of many families are being transferred to real estate because of the turbulence in world economies. Real estate, although it does not have immediate liquidity, has less volatility and, moreover, people have the feeling that they have more control over this market. That's why people with liquidity prefer to put their money into housing," he added.

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