First signs of landing as Europe’s Housing and Mortgage Markets slow their downward trends
The European Mortgage Federation (EMF) is delighted to announce the publication of its Quarterly Review of European Mortgage Markets for the second quarter of 2023.
Produced in cooperation with the Federation’s national experts, the Quarterly Review provides the latest short-term developments in mortgage and housing markets across the EU.
- The publication highlights expert analytical commentary together with data tables and charts on the following key indicators:
- Total outstanding residential mortgage lending;
- Gross and net residential mortgage lending;
- Regulation & Government intervention;
- Nominal house price indices; and
- Mortgage interest rates.
Key highlights from the Q2 2023 Quarterly Review
Macroeconomic context:
- In the second quarter of 2023, according to publications by Eurostat, seasonally adjusted GDP increased by 0.1% in the Euro area and was stable in the EU27, compared with the previous quarter. Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 0.5% in the Euro area and by 0.4% in the EU27, after increases of 1.1% in both zones in the previous quarter. During the second quarter of 2023, household final consumption expenditure was stable in both the Euro area and the EU27, and government final consumption expenditure increased by 0.2% in both zones.
- Euro area annual inflation in Q2 2023 stood at 5.5% in June 2023, down from 6.1% in May. Looking at the main components of Euro area inflation, food, alcohol and tobacco experienced the highest annual rate in June (11.7%, compared with 12.5% in May), followed by non-energy industrial goods (5.5%, compared with 5.8% in May), services (5.4%, compared with 5.0% in May) and energy (-5.6%, compared with -1.8% in May).
- The cool down in the economy, driven by the attempts to control inflation levels, creates greater economic uncertainty, which is then exacerbated by geopolitical risks in eastern Europe, contributing to the omnipresent pressure in housing and mortgage markets around Europe. Mortgage interest rates increased further but exhibited a different picture inside and outside the Euro area.
Market developments:
- The aggregated mortgage stock of the EMF country sample increased slightly to EUR 8.3 tn by the end of the second quarter of 2023. The increase in the quarters of 2023 remained at a stable level and amounted to 1.50% y-o-y in Q2 and 1.51% in Q1 2023, respectively. Considering the quarterly increases in 2023, the growth in the mortgage stock started to slightly accelerate again from 0.21% q-o-q in Q1 2023 to 0.54% q-o-q in Q2 2023. Compared to the previous year, gross residential mortgage lending decreased by 41.3% y-o-y in Q2 2023, after a 37.6% decrease in Q1 2023. Q2 2023 marked the fifth consecutive quarter with a negative yearly growth rate. The quarterly decrease of gross mortgage lending started to ease significantly.
- The development of house prices across the underlying country sample is difficult to capture, as no clear trends or patterns are present. Only in northern Europe was a significant decrease in house prices observed. The average of HPI values for the EMF country sample started to decrease in Q2 2023 to an average of 154.2, down from 159.5 in Q1 2023 (2015 = 100).
- Government intervention was focused largely on housing and mortgage affordability. Measures supporting the supply side of the market, which came under pressure due to higher input prices, were also introduced. Against this backdrop however, some jurisdictions have cautioned against actions which could undermine monetary policy.
- The average, unweighted EMF mortgage interest for Q2 2023 amounted to 4.86%, 17 bps higher than Q1 2023’s average rate (4.69%). It is the highest average rate since the start of the data record in Q1 2009. Moreover, Q2 2023 marks the seventh consecutive increase for the EMF average.
