Wednesday, July 6

The pandemic multiplies by five the renegotiations of mortgages and the changes of bank


The mortgage business has started the year off rocketing. Its levels are close to those of a decade ago and Spain leads growth in the euro zone. But the dynamism that this banking activity is showing is not limited exclusively to new loans since there is also an outbreak that has not been seen for a long time in other operations such as renegotiation in search of better conditions in the same bank or the jump from one entity to another. The banking system has unleashed, as the economic activity has been opening after the sanitary restrictions, a battle not only to attract new mortgages but also to attract them from their competitors

The granting of mortgages shoots up and places Spain’s growth at the head of Europe after the pandemic

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Specifically, between novations, as the changes in the conditions of a mortgage loan are known, and creditor subrogations, the change of bank, between January and March of this year there have been 70,928 operations, according to the statistics collected monthly the National Institute of Statistics (INE). They are five times more than the level of the same quarter of 2020. It is the highest figure in the first three months of the year since 2013. And, to give another context data, in those ninety days the number of operations of this type that were sealed throughout 2019, the last year before the pandemic.



The bulk of these changes is being produced by the renegotiations of the mortgages with the same bank with which they had been contracted. These types of agreements are those that are reached to change the interest rate, increase the borrowed capital or change the maturity period. During the first three months of the year, there have been 61,500 operations in which banks and their clients have agreed to a change in loan conditions, and in March the highest level reached since spring 2012 was reached.

Traditionally it has been common to resort to this type of agreement when, due to financial problems, the consumer agrees with the bank a change in the installments or extension of the period to be able to assume the mortgage. That is why during the last financial crisis there was also a significant growth in novations. On this occasion, the economic crisis caused by the pandemic caused a brake in the granting of credits in 2020, but, nevertheless, there has not been an increase in delinquency, as the previous crisis did, thanks among other measures to moratoriums and other aid such as ERTE.

That is why it is necessary to turn to other factors that explain why the novation of contracts increases. For example, the General Council of Notaries explained this week that the latest mortgage law, approved in 2019, included an incentive for novation to change the variable interest rate to a fixed rate, reducing the cost that early repayments would later have. Price comparators such as Helpmycash remember that these operations have a cost and if what you are looking for is to improve conditions, you must calculate how long it will take to amortize it.

At this point another factor comes into play and it is the mortgage war that is being experienced in the banking sector. This has been seen in the new mortgage market, with banks competing to be the ones that offer the lowest interest rate, either with their main brands or with their digital banks. Given the low profitability of this business, the volume takes a new role, trying to expand their customer bases while trying to prevent their own from leaving, improving conditions.

Statistics show that this battle to ‘steal’ customers from rivals in the mortgage market has also accelerated. Mortgage subrogations have traditionally been something very exceptional and it is much less common than renegotiations with the bank itself where you already have a mortgage. However, the pandemic brought a brake on the granting of new mortgages and the volumes of activity, so there was a “spur” for entities to seek new activity, offering customers of other banks improved conditions in their mortgages, as explained in its statistical yearbook by the Spanish Mortgage Association, a study center for the country’s large banks.

This inertia has continued in the market already at the start of this year, despite the fact that the activity of the new mortgages is already recovering. Between January and March, 9,351 clients decided to change their mortgages bank. It is still a low figure, compared to those shown by renegotiations with the entity itself, but growth is showing that banks are increasingly active in attracting customers from rivals. The figure is almost four times higher than that reached in the first quarter of last year and the highest since 2015.

Currently, anyone looking for a mortgage or changing banks will soon find attractive offers to attract customers in the publicity of the entities themselves or on their websites. The General Council of Notaries explained this week, in a meeting on the occasion of the first two years of the current mortgage law, which was already approved with the PSOE in the Government, that both this norm and other regulatory modifications that have been made, have greatly facilitated the fact that a consumer decides to change banks. Notaries are verifying that it has become a “fairly agile” procedure.

The mortgage is still a very big business for banks, despite the fact that the concession is no longer the same as in the past, nor are its prices, very low due to the negative interest rates that have been in force for years and that can be prolonged until the end of the decade, as the banks’ own study centers have sometimes advanced. Mortgages are usually the central product on which banks seek to build their linking strategy, on which they have been focusing their efforts in recent years. That is, prioritize customers with more contracted products. That is why the commissions to maintain a checking account are being increased in the case of those consumers who do not have more products in the bank, which pushes them almost exclusively towards digital banking. In fact, recently, one of the main entities in the country, Sabadell, announced in its strategic plan that its offices will be exclusively used to sell mortgages, investment funds and pension plans.

It is because of this search for links that a good part of the commercial offers launched by banks have the small print of the need to contract insurance or pension plans with the entity itself. The aforementioned mortgage law prohibited forced cross-selling but does not prevent the price from being discounted in the event of contracting these other products. These products are also serving in the battle of banks to attract customers from other entities. This is the case of pension plans, where it is common to find campaigns that offer up to 6% reimbursement for clients who move their savings to their entity.

In the absence of knowing the mortgage market data in April in the coming days, the metrics that show the strong development of this business in the first quarter of the year and, especially, in March are different. This is because as economic activity has been recovering after the restrictions of the pandemic, decisions to buy a house that were suspended due to the health crisis have recovered. The third month of the year has been in which the second highest level of new mortgages has been granted since 2011, with more than 5,000 million euros. In addition, to the 36,800 new mortgages that were granted by the banks, we must add the almost 24,000 that were renegotiated between clients and entities, the highest monthly figure since June 2012. Finally, more than 3,500 other mortgages must be added who changed banks, the best month in seven years. Uniting the three concepts, there are more than 64,000 mortgage-related transactions signed in Spain in a single month, the highest level since May 2011.



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