Mortgage war: These seven banks are cutting their loan prices after ECB rate cut

The European Central Bank’s (ECB) interest rate cut in June came as a balm to many mortgage families. This move by the monetary authority is already having an impact on the real economy: Euribor, the benchmark index for variable mortgages sold in Spain, hit its lowest level since March 2023 this Friday at 3.502%. This reduction implies an adjustment of loans by an average of 50 euros per month and by 600 euros per year for those subject to the July interest rate review. The Bank of Spain estimates that interest on 26% of mortgages will fall by 0.5 to 0.8 percentage points by the end of the year.

The move by the ECB, which kept rates at 4.25% at its last meeting in July and is set to cut them again in September, is also reflected in the banks’ commercial proposal. The first entity to step forward was Unicaja reduced interest rates on variable, mixed and fixed rate mortgages on June 11.followed in July Banco Santander cuts interest rates on 30-year fixed mortgages from 2.85% (2.95% in the first semester) to 2.60% (2.70% in the first semester), Ibercaja reduced its fixed and mixed mortgages, Kutxabank its floating mortgages, Cajamar its fixed, mixed and floating rate, Caja de Ingenieros its fixed rate and Cajasiete-Caja Rural its fixed, mixed and floating rate. In the spring, other organisations were already expecting the ECB reducing interest rates, such as ING with its fixed, mixed and variable offer, Openbank with its fixed and mixed offer, Banco Sabadell with its fixed and mixed offer or Bankinter with its fixed and mixed offer.

This commercial policy of banks is also explained by the collapse in the signing of mortgage loans. which has been observed since the ECB began raising the cost of money in 2022 in order to stop the escalation of inflation. According to the National Statistics Institute (INE), 27,435 home loans were registered in May, down 18.2% compared to the same month of the previous year. This figure is the lowest recorded in May since 2020 and represents the biggest decline since November last year. In the accumulated The first five months of 2024 are seeing a 4.5% year-on-year declineCompared with April, registered mortgage loans have decreased by almost 20%.

“Is for the first time in 2024, monthly data does not exceed the 30,000 concessions barrier and a path back to normality can be seen after years of booming economic activity. Despite this, such a large number of mortgage companies is a positive development in a context of high interest rates and the fact that the Euribor rate still refuses to return to levels below 3%, which is less attractive for mortgage applicants,” says María Matos, director of research at Fotocasa. .

“Now that the Euribor rate has stabilized for a few months, we will see the first reductions in variable mortgages. This will be a good sign for buyers who have been waiting for a long time for the easing of mortgage conditions. expected. new mortgage war between financial institutions to achieve as many sales as possibleand the return of fixed-rate mortgages to the banking market,” says Matos.

Mikel Riera, mortgage analyst at HelpMyCash, also predicts a commercial battle between banking organizations to attract customers before the end of the year, which could lead to lower mortgage interest rates, especially for fixed-rate mortgages, which are the most in demand in the current market. “Banks will improve their offers a little in the coming months, so Slightly cheaper mortgages will be available at the end of 2024.“But waiting can be counterproductive: house prices tend to rise, and it’s possible that what’s being paid out less in interest is being paid out more in property values,” he explains.

Economist Gonzalo Bernardos is optimistic about the mortgage market. also predicts a “mortgage war” that will have very positive consequences“Many of those who were told last year that they would not be given a loan will be given one this year,” he says. The professor of economics at the University of Barcelona (UB) also notes the increase in the percentage of financing offered by banks, which in some cases can reach up to 90% of the value of the house from the usual 80%, although this privilege is intended for clients with a stable financial situation.

Unicaja and Banco Sabadell most exposed to mortgages

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In fact, the Andalusian bank’s commercial strategy involves intensifying its promotions and campaigns to increase its financial return (ROTE), which is the lowest among the Ibex 35 banks and was 5.4% in the first quarter of 2024. Over the past ten years, it has integrated Ceiss (Caja España-Duero) and Liberbank and now aims to grow by acquiring new clients.