The Euribor rate gives hope to mortgage holders in Galicia and starts 2024 with a slight reduction.

Since Spain’s main benchmark mortgage rate, Euribor, began rising in April 2022 (when it returned to green after more than six years of negative values), the rise has been constant and very aggressive. exceeded 4% in June last year and remained above this figure for six months.

Late last year, when Euribor closed the last month of the year at 3.68%, the trend seemed to be a slow decline but constant interest rates and a possible cut in official rates by the European Central Bank (ECB) in the first months of 2024.

At the end of January, the mortgage index maintained a slight downward trend to 3.61%, however Experts believe this reduction will take longer than expected. This is a blow to the economy of many Galicians, whose mortgage payments have increased, sometimes to hundreds of euros a month.

According to EY Galicia audit partner Manuel Pestana da Silva, “Most analysts expected that during the first months of 2024 central banks would begin to formally reduce the high level of current interest rates, given the downward trend in inflation. But stagnation of geopolitical factorsalready known by adding Tensions in the Red Sea and Strait of Oman are putting further pressure on inflation.”– he emphasizes.

“Expectations for a reduction in official interest rates are fading for at least 4-5 months.”

Manuel Pestana, partner responsible for audit, EY Galicia

ECB President Christine Lagarde noted that “now is not the time to let our guard down,” so “waiting “The cut in official interest rates will be diluted for at least 4 or 5 months,” he said. says Pestana da Silva.

On January 25, after a meeting of the Governing Council, Lagarde assured that “it is premature to discuss rate cuts,” although she acknowledged that the ECB will have a lot of information in the coming months and this will be in the month March, when the organization publishes its new macroeconomic forecasts, the moment at which “will clearly communicate the inflation forecast and will lead to an assessment of whether we are on the right track,” he said.

Regarding the evolution of the prime mortgage interest rate during 2024, Manuel Pestana assures that in times of uncertainty as great as the current ones, “any forecast that can be made regarding the future carries a high risk of being wrong.” However, he assures that “although there are specific downfalls “I don’t think we’ll see interest rates below 2.5% in the long term like we’ve seen in the past.”

Mortgage reduction in 2023

Formalization Residential mortgages in Galicia have generally declined in 2023. According to the National Institute of Statistics. The latest month for which records are available is November 2023, when mortgages in the Galician community fell 25.8% compared to the same month in 2022.

If we take the first 11 months of 2023 as a basis, 11,419 mortgage loans were signed in Galicia, which is 22.5% less than in the same period last year. Regarding the mortgage market forecast, Pestana notes that “Housing has always been about location and quality, so good products remain in short supply and will continue to be in high demand. “Yes, we may start to see a decline in activity in certain segments, but we do not expect a sharp decline.”

Regarding the type of mortgage set by interest rate (in this case the figures correspond to the entire territory of the country, since there are no data broken down by autonomous communities), the trend is clear. Fixed-rate mortgages have declined significantly and steadily in recent months, falling from 75.1%. of total transactions in April 2022 to 53.2% in November 2023.

In this sense, experts do not choose any one model, since it depends on the “combination of time and price.” “It depends on the client and spreading that the bank is contacting him, but “Anything close to 2.5% over the long term can be a good product.”– says partner EY Galicia.

Regarding the products that financial institutions offer and how they are responding to the current scenario, Pestana believes that “Banks have become somewhat softer on mortgage rates,” but “we remain alert to the existence of higher remuneration on deposits, which has been talked about a lot in recent months and has not yet happened,” he concludes.