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Real Estate Watch
13.8%. This last increase was basically due to increases in housing prices remaining at over two digits.
As the growth of bank deposits was insufficient to finance this sharp increase in mortgages, banks have continued to have recourse to the capital markets. Thus, securitization funds which are largely structured around mortgages, have maintained increases of over 40% so far this year, although their growth rate has slowed. Activity in the mortgage bond market has been even more intense, with the balance increasing by over 60% in the same period.
The buoyancy of credit granted for house purchase contrasts with the increasing cost of mortgage financing mentioned earlier and this shows that the change in European monetary policy's cycle is being offset by other factors. Firstly, despite the higher interest rates, monetary conditions in Spain are in no way neutral and this continues to favour borrowing.
Secondly, partly as a result of the above factor, the macroeconomic environment is still extremely favourable, especially as regards job creation, one of the main supports of the real estate sector.
Thirdly, it is important to remember that the performance of mortgages for households is to a good extent affected by the time-lag in the case of new housing between the decision to buy a home and taking possession of it. These types of transaction are reflected in household mortgage financing with a lag and this, together with the slow repayment of this type of financing because of the long maturity, implies that the balance of mortgages to households is extremely persistent.
Fourthly, the mortgage market continues to move in a very competitive environment. The latest survey on bank loans conducted in April 2006, shows a slight easing in lending standards, although this mainly occurred because of the lengthening of mortgage maturities, with fiercer competitive pressure the main reason for this slight improvement in the conditions of supply. Moreover, banks have observed a slight increase in demand for this type of financing which they attribute, above all, to the favourable outlook for the housing market.
The sharp increase in housing starts in recent years has led to notable dynamism in lending to the construction and real estate sectors. Thus, in the first quarter of 2006 the construction sector grew by 27%, in line with the rate registered at the end of 2005. In this sector, lending granted for the construction of buildings and emblematic works increased by 30%. Lending granted to real estate services companies was even more notable: in the first quarter of the year it rose to 50% with respect to the same period the previous year.
New statistics on changes in mortgage conditions: from fixed to floating rates
The INE (National Statistics Institute) has recently started to publish new information about the changes in mortgages and mortgage repayments, which gives some interesting results. In the first four months of the year, the number of mortgages which changed their conditions increased by 32%. Of the total changes, 80% took place

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