MADRID – The number of homes in Spain sold without a mortgage rose sharply in August.
According to Spain’s National Institute of Statistics (INE), 42.45% of properties sold in August were fully paid for. This is despite a 22.7% year-on-year decline in the number of new mortgages. That marks six consecutive months of declines of more than double digits. On the other hand, interest rates shot up to 3.25%, the highest level in the past 7 years (since July 2016) and 1.3 points above the rate a year ago.
Also read: More than half of houses bought in Spain with no need for a mortgage
However, home sales fell less, namely 14.4% in August. This is because the percentage of homes purchased in cash has grown sharply to 20,908 homes in August. In Spain, 152,325 homes were purchased without a mortgage in the first eight months of the year. This equates to 36.85% of all sales.
No mortgage required
The trend towards purchasing houses without a mortgage is particularly striking for second homes. These purchases are often made by wealthy foreign nationals or local residents of large cities. In Valencia 56.6% of sales were without mortgage, in La Rioja 49.2%, in Murcia 47.8%, in Cantabria 45% and in Castilla y León 44.5%. In contrast, these percentages drop significantly in regions where first homes are also expensive, such as in the Basque Country (10.6%) or Madrid (17.6%).
According to María Matos, Director of Studies at Fotocasa, rising interest rates have changed the buyer profile. Wealthier individuals, often with real estate knowledge or from abroad, now dominate the market. These cash buyers typically already own their first home and are looking for a second home, often in a different but nearby location. The rise of teleworking and a mentality focused on long-term investments further fuels this trend.
Data published by the INE shows that the average amount of mortgages granted in August was €138,171. That is a decrease of 4.6% compared to a year ago. The increase in interest rates makes it less possible to have debts because they may not exceed 33% of the family income determined by the bank.
The capital borrowed by financial institutions amounted to €3,916.3 million, with an annual decline of 26.2%.
Also read: What lies behind the increased sales of inherited properties in Spain?
