The Covid 19 crisis triggers the novation of mortgage loans

In 2020, operations to renegotiate mortgage loans rose by 298%. The reasons are several. On the one hand, the Covid-19 pandemic has had a very negative impact on family incomes. And on the other, there is the moratorium that the Government approved to be able to face the economic and health crisis caused by the virus.

The data comes from the report The effects of the pandemic in 2020 from the perspective of the data of the Notariat, which also highlights the increase in notarial acts aimed at improving the solvency of citizens and companies.

Loan novations rise and home sales fall

Since the beginning of the statistical series of Notaries in 2007, this is the first time that there has been such a significant increase in the number of loan novations, mortgage extensions and also mortgage subrogations:

  • Novation of loans: 298% (about 130,000 operations)
  • Subrogations: 13% (31,288 operations)
  • Mortgage extensions: 12% (12,708 operations)

For María Teresa Barea, spokesperson for the General Council of Notaries, in the case of loan novations, the moratoriums approved by the Government are included. This fact has caused that in 2020 the number of operations of this type approached 130,000. The figure is close to the levels of loan renegotiations subscribed in 2013, the year in which the effects of the 2008 crisis were most noticeable.

The economic crisis caused by the pandemic has also been noticed in the increase in notarial acts that citizens and companies have carried out to improve their solvency: subrogations in the position of the debtor, the creditor, delays in the cancellation of the mortgage or extensions of this. Cancellations were reduced by 15% (296,704 operations), which is the first drop in five years.

The CGN report also highlights the decrease in the number of home sales, 15.2% less than in 2019. Mortgage loans to acquire real estate also fell (9.5% less) and the incorporation of new companies (15.4% less).

Collapses of up to 70% in the sale of homes

According to data recorded by the General Council of Notaries, the effect of the first wave of the pandemic was devastating for the number of sales. In April last year there was a collapse of close to 70% year-on-year. In this case there were no differences by the type of housing.

The number of sales recovered in the second half of 2020. But in this case there were notable differences between flats and single-family homes. The former fell by 3.5% year-on-year and the latter rose by 22.8%.

“In recent years, 80% of home sales were flats and the remaining 20% were single-family homes. This last percentage rebounded to 25% with the arrival of the coronavirus crisis. The normalization of teleworking and the change of preferences towards the advantages of single-family housing could be the main causes of this rebound.”, they say from the Council.

Although the figures are very high, the CGN report clarifies that this fall “was accentuated but not unprecedented”. To explain it, they affirm that the number of sales fell by 15.2% compared to 2019, a smaller fall than in 2008, 2009, 2011 and 2013.

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By Catharine Bwana