Summer can be a good time to make important life decisions, such as buying a new home. Since there are more hours of daylight and we tend to have more free time this time of year, it’s quite possible that we’ll find it easier to look for a home, choose one, and handle the purchase.

Therefore, if we find ourselves facing this scenario, it’s a good idea to stay informed in advance about the changes expected for mortgages in the coming weeks— and especially in 2024, a year that has already made it clear it could end up being a major turning point in reversing the upward trend in mortgage costs.

What has happened during the first few months of 2024?

Before we focus on what lies ahead in the short term, it’s important to look back to fully understand where we’ve come from. And the first thing we can say is that 2023 was a tough year for the mortgage market, as the Euribor followed an upward trend that only slowed down during its final months. Between October and December, it fell by half a point and started 2024 below 4 points (3.686).

Since then, it has remained stable, with only minimal fluctuations that have not led to any significant changes in the banks’ mortgage offers. The reason? In recent months, the European Central Bank (ECB) has chosen to keep its three interest rates, despite the recent positive news on inflation and the favorable forecasts for economic growth in the eurozone.

Specifically, and for the fifth consecutive time, at its April meeting the ECB left its benchmark interest rate unchanged (4.5%), a move that was already interpreted as a statement of intent for the future and as a preview of an imminent rate cut at its next meeting, in early June. Indeed, its president, Christine Lagarde, had already noted that, just before summer, there would be more compelling reasons to cut interest rates—something that hasn’t happened since 2016.

Will mortgage rates really go down this summer?

The key question is what changes will occur in the mortgage market this summer and whether they will actually bring good news for mortgage holders. The truth is that the developments already discussed give cause for optimism, because both the stabilization of the ECB’s interest rates and the resulting stabilization of the Euribor have provided some relief from the pressure the market has been under for the past year and a half.

This had severe effects on the housing market in Spain because, according to data from the INE, 381,560 mortgages were registered in the property registries in 2023, representing an 18% decrease compared to the previous year’s figures. Faced with high interest rates on loans, many new homeowners sought ways to pay for their homes in cash, such as using savings or money from inheritances.

Faced with this situation, banks found themselves needing to improve their terms for certain borrower profiles, and now that the situation has stabilized, all signs point to them extending these benefits to the rest of the applicants. The goal is to revive the mortgage market and achieve an uptick even during a typically slower period like the summer.

Demand will also be a factor that influences

Thus, a possible reduction in ECB interest rates in June could directly lead to further declines in the Euribor. As we will see later, this will likely lead, in turn, to imminent downward adjustments for existing variable-rate or hybrid mortgages, as well as better terms for new bank loans.

However, the actions taken by European authorities are not the only factor that will influence changes in mortgages in the short term. These changes will also depend on demand in the mortgage market itself, which, as we have already seen, fell significantly during the final stretch of 2023.

This is a situation that, as 2024 began, has started to reverse its trend. In February, there was a 6% increase in home sales, which was also accompanied by a 3.8% rise above the year-over-year average in mortgage approvals (the best figure since November 2022).

Thus, in the second month of the year, 37,232 loans were signed, which helped the situation recover somewhat and showed that this year will be crucial for banks to expand their customer bases. At least at a moderate pace, because it also seems clear that the recovery will be hampered by the obvious shortage of housing supply.

Months of “mortgage war”

That said, the situation is such that some experts have even gone so far as to talk about a “mortgage war” in the second half of 2024. Last year’s poor data has prompted banks to take action, especially regarding the types of mortgages most sensitive to these economic and social changes: adjustable-rate and hybrid mortgages.

According to Javier Ruiz, Chief Economist at Cadena SER, the forecast is that the Euribor will close 2024 at 3.3% and that, over the course of next year, it will hover around 2%. These fluctuations will mean lower interest income for banks and, therefore, will force them to improve their loan offers in an effort to increase their business volume. This should lead to greater competition in the market.

Despite this, just before summer, the main changes in mortgages were limited to fixed-rate and hybrid mortgages. In April, it was already possible to find fixed-rate mortgages with interest rates below 3% ( even though the Euribor stood at 3.718%) and hybrid mortgages with a fixed nominal interest rate of 2.25% for the first few years. These are attractive terms, but they also serve as a preview of the major shifts expected in the variable-rate mortgage market.

Outlook for Existing Mortgages

The fact is that prospective homeowners aren’t the only ones closely following changes in mortgage rates. Property owners who already have a variable-rate or hybrid mortgage —and who, as a result, have seen their monthly payments increase to a greater or lesser extent in recent months—are also keeping a close eye on the situation.

Aside from the very slight increase in the Euribor that occurred in March (0.047%), which affected only those whose annual rate adjustment took place that month, periodic adjustments (including semiannual ones) are now expected to begin benefiting customers.

What’s more, according to OCU estimates, in April, mortgage holders whose payments are adjusted every 6 months had to pay 23 euros less per month for every 100,000 euros outstanding . And these reductions could be even more pronounced in the summer, provided that the aforementioned forecasts of declines in the Euribor materialize.

Will this summer be a good time to buy?

Everything suggests that this is the case, at least when compared to the situation in recent months. Today’s situation points to changes in mortgages—slow but noticeable—that are becoming increasingly advantageous for consumers, especially for those who are now preparing to take out a mortgage. As a result, patience could also end up being a key factor, since the outlook could be even better by 2025.

Therefore, for prospective buyers, the decision to purchase a home now or wait will depend largely on how urgent their need is. If there is no urgency, it is probably advisable to wait a few more months to allow the Euribor to fall below 3% and for these improvements in loan terms to become more firmly established. This is especially true for variable-rate mortgages.

Mainly because, although it’s impossible to predict the future with 100% certainty in the mortgage market, the trend at the start of 2024 is clear and points to a summer that will mark a turning point for the market: After a particularly difficult 2023 and a relatively stable start to the year, the second half of 2024 will most likely bring plenty of good news.

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• Mortgage Interest Rates: How They’re Determined and Why