Mortgages rise this year four times more than salaries in Tarragona
If until now salaries were well below what inflation was rising, now they are also lagging behind in the face of mortgages that are beginning to grow. effort rate to pay the home loan in Tarragona has skyrocketed this year from 16.5% to 23.8%in an unprecedented increase in the last five years, according to the reports of the third quarter of 2021 and 2022 of the appraiser Tinsa.
It's a 7.3% increasefour times more than what wages are improving under the agreement. Salaries have been revalued a scant 1.72% so far this year, one of the lowest increases in all of Spain, according to statistics from the Ministry of Labor. Hence the high labor conflict unleashed in some sectors.
A study by the Idealista portal maintains that "the rise in financing has caused families to have to make a greater financial effort for the purchase of a home having to dedicate 23.5% of family income, compared to the 20.1% they needed a year ago». The current effort has nothing to do with what was achieved in the most buoyant times of the real estate bubble. Nor is the impact on real-estate market is still exaggerated. Nor there is, for the moment, a serious affectation, but there are signs. «On the part of the buyers, they are assuming the changes, because there is no other remedy. There are entities that have respected what was agreed and there are others that have not, that cling to the new. Some increase the totality and others make a mix. Of course, if the increases are maintained there will be a deduction from the purchase», explains Diego Reyes, president of the Association of Promoters of Tarragonés.
Payrolls increase well below the rates and the effort of a household to pay the house
Or, to put it another way, there is no fear but there is uncertainty. «Many people buy having the ticket and then, it is not that they go to the limit, but there is a psychological factorwhen thinking 'If this is what is happening, what can happen in the future?', indicates Reyes.
Everything will depend on whether rates continue to rise. “If they hold, there will be some stability to buy. But, demand will shrinkboth in new and second-hand housing », explains the promoter from Tarragona. Also attend a some rush to write before the last uploads and, in some way, protect themselves against a convulsive scenario of constant increases by the European Central Bank (ECB).
Then the financial policies of each bank appear, which are already being adapted. “Financial institutions are putting some less weak and less flexible standards when it comes to accepting those buyers who are more forced. They are more cautious,” acknowledges Reyes.
Driven out of the market
Another Idealista study sheds light on a budding reality: expelled from the purchase market as a result of the increase in rates. In the scenario prior to the invasion of Ukraine, when effective rates (the average rate paid for a loan, whether variable or fixed) were around 1%, only 1.8% of mortgage applications were rejected for not having a family income in which the mortgage payment does not represent less than 35%.
The average mortgage in Tarragona stands at 486 euros before the latest rate hike
Currently, with the effective rates around 3%, the percentage of rejection increases to 11.9% in the overall of Spain and it goes even higher in Cataloniawhere it stands for the moment at 12.3%. In the event that the rates rose to 4%, 21% of those eventual mortgaged would stay out of the market.
Shelter in rent?
Juan Villén, head of mortgages at Idealista, proposes a scenario in which "in the short term, a large part of the demand, being expelled from the market, takes refuge in rent, with the consequent increased tension of rental prices. For years rent rates have riseneven exceeding the average installments of a mortgage. Tinsa placed the amount in the province of a housing loan in this third quarter of 2022 at 486 euros. Meanwhile, a report from the Chamber of Urban Property of Tarragona placed at 611 euros the average monthly rent in the capital.
All this will also end up being counterproductive for the financial system itself: "From a strictly banking point of view, the financial system will also be penalized for the number of loans it grants."
"There have been three operations that have not materialized because the numbers did not come out after the rate hike," says the agent David Janssen, manager of Barnamar Salou
The person in charge of Idealista emphasizes that “it cannot be ignored that the percentage of families that remain within the acceptable margins will see how their risk also increases. The cost that they will have to assume to pay the mortgage payments is greater and inflation directly impacts disposable incometherefore, their saving capacity will be reduced, or in the most extreme cases, their consumption capacity».
Villén believes that "in this situation, families who are considering buying a home in the short term should always look at these scenarios realistically». The real estate expert advises “reconsider the type of housing (at least economically) to which they choose; Only a scenario in which prices begin a rapid downward spiral in the coming months could cushion the impact of the rate hike, something that does not seem likely to happen, at least in the short term.
Profiles that give up buying
David Janssen, manager of the Barnamar real estate agency in Salou, lives joint brakes: «The year has gone very well for us, we have made record sales but there are three operations that have not materialized because finally the numbers have not come out due to the rate hike. An example: for 600 euros a month they could assume the mortgage but for 750 no longer ».
"There are financial entities that respect what was agreed when notarizing and others that do not," says Diego Reyes, president of the Tarragonès Promoters Association
That is only what is perceived. «Afterwards there will be many people who planned to buy but who have directly stayed at home. It is not something exaggerated but that profile does exist, “adds Janssen. It is the initial anxiety after a very positive 2022. “The speed of operations was maximum until March and April, May and June also continued to be good and now it shows that the market slows down» admits the agent.
Janssen also witnesses changes in financial institutions: «The tendency will be more and more not to make general offers for everyone, but to personalize them a lot based on the client's profile, just as it happens with consumer loans, to take into account all the variables before granting the loan».
The average amount of a mortgage rises 10,000 euros in Tarragona in a year
It is still early to gauge the size of the rate increase, but the latest data from the INE and the appraiser Tinsa show some increases in the third quarter of this year. The average amount of a mortgage on a home in Tarragona has grown by around 10,000 euros in the last year, according to August figures. The difference is even more voluminous when it comes to mortgages that include all the farms, not just the house: it goes from 104,176 euros to 119,279 in the interval of the last year, about 15,000 euros more. Likewise, the average installment of the loan that ends up being paid and the same rate of effort that a household must assume also grows.
Tinsa admits that "purchases during the first half of the year have continued to show an upward trend, although they reflect a slight slowdown» compared to the same period in 2021.
The containment is more pronounced "in the number of new mortgages granted for the purchase of housing", which "begins to reflect a tightening of risk granting criteria for institutions against the effects that inflation and the change in the monetary policy of the ECB may have on the borrowing capacity of households”.