The «eurozone» mortgage market experienced a historic downturn in the last quarter of 2022. We learned the details.

The average decline in mortgage demand throughout the «Eurozone» was 74%. Such deterioration has not been seen since 2003, that is, since the beginning of such statistics.

The European Central Bank conducted a study of bank lending from December 12, 2022, to January 10, 2023. It was attended by 151 banks from the «eurozone» countries. 

Where has the demand for mortgages fallen most noticeably? The demand for mortgage loans «fell» the most in Germany and France, where 93% and 90% of banks, respectively, reported declines. By comparison, in Italy, about 45% of banks reported a decline in demand, and in Spain, — 20%.

What is the reason for this drop in demand? The Eurozone’s residents are increasingly turning away from mortgages due to rising interest rates, lower consumer confidence, and the deteriorating prospects of the housing market. The fact that the requirements for mortgages and consumer loans have become more stringent in recent years, for both individuals and businesses, also plays a significant role. 

What are the experts’ predictions? 

Capital Economics predicts that housing investment will fall 12 percent year-over-year due to falling demand for mortgages. And that drop, in turn, would reduce annual economic growth by 0.7 percentage points.

In several countries, including Germany and the Netherlands, home prices will fall by more than 5 percent in 2023, according to Oxford Economics forecasts. Across the eurozone as a whole, home prices will fall by 2.4 percent, according to the consulting firm.