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The Bank of Spain has said it is carefully evaluating possible restrictions on mortgage lending to strengthen financial stability without worsening pressure in the country’s rental housing market. In its latest financial stability review, the central bank warned that tighter lending norms could shift more people from homeownership to renting, potentially increasing rents further in a market already facing a major housing shortage. While home prices and mortgage lending continue to rise, the regulator said current data does not indicate signs of a real estate bubble similar to the one that led to Spain’s housing crash and banking crisis in 2008.
The Bank of Spain has warned that introducing stricter mortgage lending rules could unintentionally increase rental prices, as more households may be pushed away from homeownership and into the rental market. Advertisement
In its latest semiannual financial stability report released during the past week, the central bank said it is working on a framework that would allow authorities to activate macroprudential measures on mortgage lending whenever risks in the housing market increase. The measures are aimed at improving the resilience of both households and banks by preventing excessive borrowing and risky lending practices.
However, the regulator said such restrictions could also create pressure on Spain’s already strained rental market. According to the report, tighter lending conditions may reduce access to home purchases for some buyers, shifting demand toward rental housing. While this could help moderate house prices, it may simultaneously lead to higher rents and weaken the overall effectiveness of the measures.
The Bank of Spain said any restrictions on lending standards would therefore need to be carefully calibrated to avoid creating additional stress in the housing market.
Spain has been facing sustained housing affordability issues over the past few years, particularly in major cities including Madrid and Barcelona. Rental prices have continued to rise faster than inflation, increasing by 10% in 2024 and a further 5% in 2025. The country is also estimated to be facing a housing shortage of around 700,000 homes, which has added to supply pressures across both ownership and rental segments.
The central bank’s review showed that home prices in real terms increased by 9.7% annually in 2025. Despite the recent growth, prices still remain 14.7% below the levels recorded in early 2007 before Spain’s real estate bubble collapsed and triggered a banking sector bailout during the global financial crisis.
Speaking during a briefing, Financial Stability Director Daniel Perez Cid said the institution has not yet identified warning signs commonly associated with a housing bubble, including excessive credit expansion or unsustainable lending growth.
Mortgage activity has nevertheless continued to expand. The stock of mortgage loans rose 3.7% year-on-year in the fourth quarter of 2025, marking the fifth consecutive quarter of growth. The central bank noted that lending levels still remain significantly below the pace seen during the housing boom period between 2000 and 2008.
Data for March also showed that new mortgage lending in Spain increased 9.6% year-on-year, supported partly by relatively lower borrowing costs compared to other euro zone countries.
Spanish banks currently offer the second-lowest mortgage rates in the euro zone, with average rates standing at 2.75% in March. Lending trends among banks, however, have varied considerably. During the first quarter, Banco Santander increased new mortgage lending in Spain by 44% compared to the previous year, while Bankinter reduced new mortgage issuance by 40% during the same period.
The discussion around tighter lending standards comes at a time when several European regulators are monitoring housing markets closely due to rising property prices, affordability concerns, and the risk of household debt accumulation after years of lower interest rates.
Source Reuters
5th Jun, 2025
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