Inflation and subdued market expectations leave their mark on Europe’s housing and mortgage markets
Brussels, 9 May 2023 – For immediate release
The European Mortgage Federation (EMF) is delighted to announce the publication of its Quarterly Review of European Mortgage Markets for the fourth quarter of 2022.
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 for Q4 2022 Quarterly Review
Macroeconomic context:
- In Q4 2022, there was an overall relative deceleration in the rate of economic activity in Europe. According to the latest data published by Eurostat, seasonally adjusted GDP values show a relative deceleration as follows: the indicator increased by 1.8% in Q4 2022 compared with Q4 2021 in the euro area (after an increase 2.4% in Q3 2022), while GDP expanded by 1.7% in the broader EU on the same basis, down from a yearly rate of 2.6% one quarter prior. For the whole year 2022, euro area GDP increased by 3.5% compared to 2021 values (5.3% in 2021), as did the EU27 aggregated GDP (5.4% in 2021). Inflation has been a persistent element in Europe and comparatively high, yet the expansion of consumer prices seems to have slowed during the fourth quarter. By the end of December 2022, the annual inflation rate in the euro area was 9.2%, after a 10.1% inflation rate one month prior. By comparison, euro area inflation in December 2021 was 5%. Regarding the greater EU27 area, end of year inflation was 10.4%, down from 11% in November 2022.
Market developments:
- The aggregated mortgage stock of the EMF country sample was approximately EUR 8.24 tn by the end of the fourth quarter of 2022. Despite the additional gains recorded during this period, continuing the upward trend that first began in 2017, the pace of growth decelerated noticeably. Indeed, the European mortgage stock rose by 1.9% in Q4 2022 compared to the same quarter of the previous year, after a 3.1% yearly increase in the previous quarter. Against this backdrop, overall gross lending in Europe decreased by -12% y-o-y in Q4 2022, after a -6% yearly contraction one quarter prior. It is the third consecutive quarter with a negative growth rate. Total gross lending amounted to EUR 331 bn, the lowest since pandemic-marked Q3 2020.
- Housing market developments were also quite diverse in the EMF sample, although a majority of participating jurisdictions reported either a deceleration of permit issuance and/or building starts and completions, or a clear contraction of these indicators. In turn, the average HPI values for the EMF country sample, based on the data available to date, expanded once again in Q4 2022, with a yearly rate of 6.2% (against Q4 2021). Despite maintaining its upward momentum, this latest rate would be the slowest since Q1 2021, in the midst of a gradual deceleration that enters its third consecutive quarter, following the Q1 2022 peak growth of 13.3% y-o-y.
- In terms of regulation and government interventions, inflation, as reported in previous editions, has been a driving factor behind recent policies or targeted measures implemented by national lawmakers and authorities. However, the quarter also saw new or updated measures focused on supporting borrowers or improving the energy performance of residential buildings, to name a few.
- Lastly, the average, unweighted EMF mortgage interest for Q4 2022 (calculated using the latest data submitted by participating EMF jurisdictions) was 4.09%, 58 bps higher than Q3 2022’s average rate (3.51%). It is the highest average rate since Q4 2012. Moreover, Q4 2022’s marks the third consecutive increase for the EMF average, yet it is comparatively lower than Q3 2022’s record-setting quarterly hike of 72 bps.
