Mortgage demand in Spain plunged 40% in the third quarter of 2026, the sharpest quarterly drop in three years, according to the Bank of Spain. For anyone looking to buy on the Costa del Sol, the market itself remains active — but it's worth understanding why credit is tightening and how to plan financing accordingly.
How much has mortgage demand really fallen?
The net balance of Spanish banks reporting a drop in mortgage applications for home purchases reached 40% in the third quarter of 2026, according to the Bank of Spain's Bank Lending Survey (EPB). It's the highest quarterly figure in three years, and it outpaces the decline recorded across the eurozone as a whole. Demand also fell for business loans and consumer credit, though less sharply than for mortgages.
Why is mortgage credit slowing down?
The surveyed banks themselves point to the European Central Bank's two rate hikes between June and September 2026 as the main driver, which pushed the cost of money to 2.5%. On top of that, a weaker housing market outlook and declining consumer confidence — the two factors the ECB identifies as decisive across the eurozone — are also weighing on demand. The effect shows up in the Euribor too, which closed October 2026 at 3.23%, making variable-rate mortgages more expensive.
A trend spreading across the eurozone
According to the ECB's survey of 159 European banks, the net balance of lenders reporting falling mortgage applications rose to 27% over the summer, up from 15% the previous quarter — the highest figure since 2023. Spain, Germany and France posted the sharpest declines, while demand held steady in Italy. Banks also reported a net increase in mortgage application rejections, up to 5%, above the historical average of 4% since 2015.
| Indicator | Figure |
|---|---|
| Mortgage demand drop in Spain (Q3 2026) | 40% (net balance, Bank of Spain) |
| Mortgage demand drop in the eurozone (summer 2026) | 27% (up from 15% the previous quarter) |
| Forecast eurozone drop for Q4 2026 | 36% (net balance expected by banks) |
| Forecast drop in France for Q4 2026 | 88% (the sharpest since 2022) |
| Euribor at end of October 2026 | 3.23% |
| ECB interest rate since September 2026 | 2.5% |
The contrast: home sales in Spain are still holding up
Despite the slowdown in new applications, sale figures haven't shown the same drop — at least not yet. According to Spain's National Statistics Institute (INE), August 2026 saw 49,319 home sales completed (up 3.4% year-on-year) and 33,841 mortgages signed (up 2.3%), with an average loan amount of €181,285. The likely explanation is a time lag: these deals reflect applications filed months earlier, before the ECB's rate hikes fully took hold. Banks themselves are already anticipating tighter lending criteria in the fourth quarter, especially in France, Spain and Italy.
What this means for buying on the Costa del Sol
En zonas como Marbella or Malaga, a large share of international demand buys in cash or arranges financing outside Spain, so the tightening of Spanish bank credit affects it less directly. Even so, it's worth factoring in if you plan to apply for a local mortgage: banks are now asking for more guarantees and weighing risk profiles more carefully before approving, and with the Euribor above 3%, fixed-rate mortgages are gaining ground over variable ones. Our practical tip: get mortgage pre-approval before you start viewing properties, and compare at least two or three banks, since terms vary significantly between lenders in this tightening environment.
Conclusion
The overall picture is a more demanding credit market across Spain, but with sales still holding up and the Costa del Sol relatively shielded by its weight of international and cash buyers. If you're considering buying in the area, EVS Property can help you plan the purchase — with or without a mortgage — and find a property that fits your actual budget.
Frequently asked questions
Are Spanish banks still giving mortgages to foreigners?
Yes. Banks are still approving mortgages for non-residents and foreign buyers, but with stricter criteria since the ECB's rate hikes — more documentation, more guarantees, and generally a somewhat lower loan-to-value ratio than before 2026.
How does the ECB rate rise affect buying in Marbella or Málaga?
It mainly affects buyers who need financing in Spain: variable mortgage payments rise with the Euribor, and banks ask for more guarantees. International buyers who pay in cash or finance abroad feel it much less.
Will the Euribor keep rising?
The Euribor closed October 2026 at 3.23%, following the ECB's rate hikes to 2.5% between June and September. Its future path will depend on the ECB's next decisions, which so far haven't signaled further increases.
Is it better to buy in cash now rather than get a mortgage?
It depends on the buyer's profile. Paying in cash avoids the rising cost of credit, but many buyers prefer to finance part of the purchase to preserve liquidity. With the Euribor above 3%, comparing fixed vs. variable mortgages and getting several bank offers matters more than ever.
Where can I check real prices by area on the Costa del Sol?
In our live Costa del Sol market report, we publish median prices and €/m² by municipality, updated every month, so you can compare areas with real data before deciding where to buy.
What next? The most useful thing after reading is to look at the real market: browse properties by city or tell us on WhatsApp what you are looking for — area, budget, timing — and we will prepare a tailored selection, with no obligation.
You may also find useful: sell your property invest on the Costa del Sol free valuation monthly price report
