The Spanish real estate market is showing early signs of cooling. In July, 3.5 percent fewer mortgages were taken out for the purchase of apartments and houses than a year earlier. At the same time, the average interest rate rose back above the three percent mark.
Spain Expat Press Editorial Team
by Marlon Gallego Bosbach
The Spanish mortgage market suffered a significant setback in July. According to data from the Spanish statistical office (INE), a total of 43,372 mortgages on residential properties were registered. This represents a decline of 3.5 percent compared to July 2025.
This marks the sharpest market decline since June 2024. The situation had appeared significantly more positive as recently as June, when the number of newly concluded residential mortgages had risen by 10.8 percent year-on-year.
Average mortgage amount reaches record high
While the number of mortgages declined, the average loan amount rose significantly. Those who financed a residential property in Spain with a mortgage in July borrowed an average of 180,785 euros. That was 10.9 percent more than in July of the previous year.
This reveals a striking pattern: fewer mortgages are being taken out, yet the individual loans are significantly larger. A key reason for this is the continued high level of real estate prices. Anyone wishing to buy an apartment or a house in Spain today often needs to finance a larger sum than was the case just a few years ago.
Interest rate rises above three percent again
At the same time, real estate buyers face an additional burden: financing has become slightly more expensive again. The average interest rate for newly concluded residential mortgages rose to 3.01 percent in July. This marks the first time since January 2025 that the figure has exceeded the three percent mark.
In May, the average interest rate had stood at 2.98 percent. The increase is therefore initially comparatively small. However, with long-term financing, even small changes in the interest rate can have a significant impact on the total cost of a loan.
Fixed-interest rates remain in high demand
The majority of new mortgages in Spain continue to be taken out with a fixed interest rate. In July, fixed-rate models accounted for around 62.3 percent of new residential mortgages, while approximately 37.7 percent were arranged with a variable interest rate.
The average initial interest rate for fixed-rate mortgages was around 3.03 percent, while variable-rate mortgages initially averaged 2.97 percent.
Fixed-rate financing thus remains an important option for many buyers. Above all, it offers greater predictability regarding monthly payments, whereas the costs associated with variable-rate mortgages can fluctuate depending on future interest rate trends.
ECB creates a changed interest rate environment
Developments in the Spanish mortgage market are coinciding with a period in which the European interest rate environment is shifting once again. The European Central Bank tightened its monetary policy in 2026 and raised key interest rates. Consequently, conditions for real estate financing may also change.
However, a careful distinction must be made regarding the timing of the relationship between ECB decisions and Spanish mortgage data. The current figures relate to July. Consequently, subsequent interest rate decisions by the ECB cannot be the cause of mortgages that were already concluded in July.
However, the changed interest rate environment could play a more significant role in the coming months.
Real estate market shows mixed signals
Despite the decline in July, it is currently not possible to speak of a slump in the Spanish mortgage market. A look at the first seven months of the year shows that the total number of newly registered residential mortgages remains above the previous year’s level. The drop in July thus follows a comparatively strong first half of the year.
The picture for real estate sales is also mixed. While mortgage figures have remained relatively robust so far this year, other market data point to a slowdown in activity.
Significant regional differences
Trends also vary significantly from region to region. While some regions continued to record rising mortgage figures in July, the numbers fell sharply in other parts of Spain.
Regions with particularly sharp declines included Cantabria, Aragon, and La Rioja. In contrast, increases were recorded in the Balearic Islands, Asturias, and Galicia, among others.
The largest absolute mortgage volumes continued to be concentrated in Spain’s major real estate markets. A particularly high number of loans were originated in Catalonia, Andalusia, Madrid, and the Valencia region.
What does this development mean for real estate buyers?
The current outlook for people wishing to buy property in Spain is mixed. Demand for real estate remains steady. At the same time, buyers need to take out larger loans on average to purchase a property.
In addition, financing costs are rising slightly again. Especially with larger loans, even minor changes in the interest rate can noticeably alter the monthly installment and the total interest costs incurred over the loan term.
It is therefore becoming increasingly important for buyers to compare various financing offers and to consider not only the interest rate but also the term, equity, repayment, and potential additional costs.
Not yet a slump, but early signs of a cooling-off
Current figures paint a nuanced picture of the Spanish real estate market. The number of new mortgages fell significantly in July, while the average loan amount reached a new high of €180,785. The average interest rate also rose back above the three percent mark.
Two trends are currently converging: real estate buyers continue to take out large loans but face higher financing costs. Upcoming data from the Spanish statistical office will reveal whether the July decline represents merely a temporary fluctuation or the start of a more sustained cooling of the mortgage market in the months ahead.
