Occasional Papers. 2620. Determinants of the interest rate type of mortgages and the evolution of their margins during the 2022-2023 monetary policy tightening
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Occasional Paper examining why fixed-rate mortgages have gone from a minority to the dominant product in Spain and how margins evolved during the 2022-2023 monetary tightening. Supply factors linked to banks explain more than demand factors, and larger banks are more inclined to lend at fixed rates.
Key points
- When rates were low, borrowers with weaker repayment capacity tended to choose variable or mixed mortgages; that link disappeared at large banks as rates rose.
- Margins on fixed-rate mortgages were squeezed, especially at large banks; those on adjustable mortgages barely changed.
Who is affected
Credit institutions, mortgage borrowers and monetary transmission analysts.
Plain-language version
A Bank of Spain study explains why fixed-rate mortgages, where the monthly payment does not change, went from rare to the most common type in Spain. What banks offer matters more than what borrowers ask for. When interest rates rose in 2022-2023, banks made less money on these mortgages.
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Summary produced with artificial intelligence from the official publication. It may contain errors: always check the original document.
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