Blog – Spanish Mortgages Personal and Professional information service Thu, 20 Feb 2020 19:54:41 +0000 en-US hourly 1 Bank Lending in Spain Wed, 05 Feb 2020 16:04:19 +0000 Bank of Spain quarterly survey

The Bank of Spain has issued its quarterly report on Bank lending for Q4 2109.

The data, some of which is open to question, is compiled not from statistics but from a questionnaire sent to participating lenders.

Given the lenders may wish to politically skew some of their answers it is difficult to ascertain what is factual versus heresay.

What is factual is that demand for mortgages in Spain to buy a residential property fell during the quarter.

The demand for loans in Spain showed the biggest decline since 2013.

Rationale for drop in demand

Spanish lenders have told the Bank of Spain this is not due to regulatory and supervision changes and to do so would have been admitting to their lack of preparation for the changes implemented in June of 2019.

This said overall demand does seem to have stalled and can be put down to a number of factors including a decrease in non resident applications due to Brexit and concerns over the economic stability and continuing growth of Spain.

The Spanish Banks anticipate demand will continue to decline for the foreseeable future.

Whilst this may well be the case we have seen an upturn in new enquiries from UK residents since the UK election.

Whilst enquiries are up quality of these enquiries is down.

Quality of Spanish loan applications

Many borrowers are looking for equity release which is not something that can be gained as a non resident of Spain unless the funds are to be for improvements or to partially assist in buying another property or loan to values required are too high and or debt to income ratios too high.

Adjustments last year were made by the lenders making it much more difficult for a non resident to gain the full 70% loan to value unless they earn their incomes in Euros and for UK applicants many lenders have tightened debt to income ratios reducing them from the normal 35% to 30% or less.

The rationale for this is a concern over what will happen to the pound as any drop in the currency increases the actual cost for the borrower plus a concern as to what overall will happen to the UK economy once it is outside of Europe without knowledge of how future trade deals, or not, will look and its subsequent impact on UK growth, employment and company owners.

Non of this is going to change until the situation has settled down, the picture is clear and the UK has demonstrated that at worst Brexit has had a neutral impact. It may therefore be some years before lenders go back to offering 70% as standard.

Loan to values under pressure

A handful of lenders remain open to 70% loan to value but very much on a case by case basis and the application needs to be vanilla in terms of the borrowers overall exposure to borrowings so capital borrowed and level of outgoings versus net incomes.

For non residents outside the UK the changes to regulation for non euro earning applicants remains the same as it did a few months ago with many lenders withdrawing fixed rates and or no longer offering any facilities to certain categories of borrowers.

Given the implementation of alterations to risk criterias have not been the same across the board some of this may change as 2020 progresses and due to decreasing demand lenders could re-assess their approach they have taken on basis not all lenders have taken such drastic action.

Interest rates

Interest rates remain low and where long term fixes can be gained continue to look very good value for money.

The 12 month Euribor has seen very marginal increases for the last 4 months but still remain on negative territory and the Banks report access to funds has remained stable and in many instances has not been required due to a drop in demand.

Brokers in Spain provide access to total market

The market remains challenging with a continuing decrease of access to independent brokers who can access the whole market for applicants due to an inability to meet new supervisory requirements and the pot luck of a mortgage application in terms of a direct application depending on the risk criteria of that particular lender.

Many applicants have been rejected when going direct to Banks and led to believe that this would be the case with all lenders. Knowledge of what can and cant be done with each lender and tailoring an application on this basis is now a big part of the role a broker would play and is even more crucial than just looking at rate.

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Lending in Spain improves in October Fri, 03 Jan 2020 17:40:28 +0000 Spanish Lending figures in October

Octobers Spanish loan figures showed an improvement on the dismal figures from last two months but remained depressed against October 2018.

How much of this is still due to a backlog from the regulation change is difficult to tell but after 3 months in row of low numbers the year to date is now very static against the full year figures of 2018.

Political uncertainty both in Spain and across Europe has dampened the sales market somewhat. Spain still struggles to get in place a majority government which is not helping to home market and the UK has only just defined next steps on Brexit which has kept British buyers at bay.

The current trend is therefore expected to be reflected in the last two months figures of 2019. 2019 will almost certainly be static against 2018 with little to no growth.

Figures up in October over September

In October 29,691 new Mortgages in Spain were constituted. This was up 32% on the previous month but down 2.1% against October last year.

The amount of capital lent was up 26% over September but down 1.1% against same month of last year.

The average loan size was up 2% on last year but down 4.6% against previous month and came in 129.200€.

As a positive whilst October is normally down against September figures the reverse was true this year which suggest delayed Spanish loan completions are now at least getting to signing.

Regionally Andalucia had a better than average month most other favoured non resident buying areas were either in line with averages or slightly down against average.

Home loans make up higher percentage of all new credit

65% of all new credit was for home loans back to normal levels after a couple of months of being below 60% of all credit flowing into market.

Interest rates remained low. The average total rate on a 24 year term was 2.5% some 5% lower than last year. Variable rate average was 2.17% 10.2% down on 2018 and fixed rate average was 3.02% 0.1% higher than last year.

Fixed versus variable rates

Fixed rate growth has stalled as a percentage of all new loans at the 45% mark. Whilst this is a considerable shift from where we were 3 years ago variable rate options still remain the favourite route for borrowers.

Fixed rate Spanish loans for non residents who don’t earn income in euros continues to take a hit as more and more Banks withdraw offering fixed rate options to non residents applying for a mortgage

Increasingly some current EU expats working and earning in certain countries are being blocked from lending at all as the Bank will not deal with the currency they earn in and the new law says if exchange rates drop by more than 20% the borrower has the right to change the currency of the loan.

This only affects loan applicants who are currently originally from the EU as the law only gives the right to EU citizens to request this change.

Spanish Banks will miss yearly targets by quite someway this year. It will be interesting to see their response to this in the New Year.

We may seem some challenges to the wording of the new regulations where it appears the wording does not reflect the impact it was supposed to have, currency change being one of these.

Access to Spanish Mortgage brokers declines

New loan regulation in Spain has also reduced significantly the amount of Spanish mortgage brokers an applicant can access due to them not being able to meet the requirements to continue to trade on an independent basis and manage the application through its underwriting process.

Most brokers will have had to move to presentation only which means they can only pass the contact details of a potential client direct to the Bank and from there on in the client will have to liaise directly with the lender.

The intermediary will not be able to collate, check and package the documents for application and neither will they be able to negotiate on terms and conditions or partake in part of the process at all.

Under data protection rules the lender will only be able to pass on information and communicate questions and results via the client themselves.

The service and assistance they can provide to a new loan applicant will be negligible past handing them over to a specific Spanish lender.

Given many issues with the Spanish mortgage application process arises because of language barriers, misunderstanding of paperwork and slow service it will almost certainly be of detriment to non resident applicants to have a much narrower level of companies they can appoint to make sure none of the above happens and they get access to best possible terms and conditions in a timely and efficient manner. Testimonals show what added value a good intermediary can provide.

Unlike may countries where you can grandfather into regulation if you can demonstrate experience and quality implementation in the sector no such options have been offered to brokers who already worked in sector but cannot meet the new requirements.

Cancelled loan levels

In total 29.330 loans cancelled in the month so new loans moving onto the lenders books were more or less negated by those moving off the book.

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Loan levels in Spain under pressure Mon, 02 Dec 2019 18:25:31 +0000 Septembers loan data for Spain  released by INE.

As was the same in August for Spanish mortgages the month of September was well down on the previous year as it would appear completions still get delayed post the new regulation and process for completion.

Other indicators like level of loans redeemed tend to suggest it is a blockage in the system rather than a permanent decline in business levels.

22,488 new loans were registered at land registry but equally only 22,365 loans were redeemed.

Because the data relates to Spanish land registry information rather than Spanish Notaries, Septembers completions probably reflect in general signings from August which were heavily affected by the changes , the obligatory cooling off period and the lenders lack of preparation for the new offer document requirements.

Regulation reduces speed at which Spanish home loans go to completion

Whilst over the last few months we have started to see the log jam starting to move even now in November the impact of the new process is being felt.

It remains difficult to get loan applications to completion at any level of speed and many applicants are finding they are having to have new offers prepared as lenders adapt their systems and catch up on the new requirements. Each new mortgage in Spain re-offer restarts the cooling off period delaying when and how a completion can happen.

Fixed rate limitations

Access to fixed rate best buys for non resident applicants continues to drop as more and more Spanish Banks review what currencies they would be willing and capable of changing the loan to.

UCI owned by Santander due to political reasons has amazingly not included US dollars in their list of countries.

In a sledge hammer to crack a nut the knee jerk reaction of the Banks in Spain is what we have come to expect. Denying access removes any dubiety and any risk for the lenders so this is how many have dealt with the issue.

The reality if thought through logically is that no-one even with a 20% drop in currency would look to change their loan to the currency in which they earn. Firstly currencies fluctuate and rarely stay at very low levels if historically they have a range level against the euro. Unless the country is ion its knees the drop will eventually rectify itself so the issue would be short term.

When the capital was changed to the new currency the mortgage in Spain level would increase accordingly so when looking at impact most borrowers would not wish to change the currency and increase the amount they owe for something that will doubtless adjust back in the short or medium term.

However as the law stipulates the lender must allow a currency change, if they cannot deal in that currency they cannot take view it is unlikely to happen as if it does they have to abide with request.

Key factors for September

Over last year loan levels in Spain were down 31.6%, the average loan size was up significantly at € 135.4k but despite this increase due to the significantly lower number of home loans capital lent was down on last year.

Month over month September was an improvement on August but only in line with the increase percentages we normally see at this time year. Given August numbers were very low one might have expected the month over month figures to be above normal trends not in line with.

Interest rates continued to edge downward over last year and last month.

The total average rate over a 24 year term was 2.51%. Variable rate averages were 2.25% and down 4.5% on last year and fixed rate averages were 3.08% fixed for 24 years up 1.88% on last year.

Fixed rate product types as a percentage of all new loan deals fell in the month to 38.3% having been at over 40% of all new applications and completions for a number of months.

All regions saw a drop in business over last year Madrid saw a good increase month over month but many were either static or dropped.

UK residents applying for a Mortgage in Spain

Challenges remain for the market with British non resident applicants feeling the impact of the lenders concerns over an impact of Brexit.

The key issue for the Banks is a belief that deal or no deal sterling will come under pressure so have tightened affordability ratios to reflect this concern along with their perceived view  of the economic impact of no deal on the UK.

Loan to values have been adjusted for British buyers with 70% now being much more difficult to obtain in at least the short term.

Middle east buyers have been affected by the currency law as no lenders will agree to change a loan to Dirhams or any other Middle East currency.

Access to multiple lenders

More than ever good advice and access to a range of lenders is needed but this is required by applicants at a time when less independent, experienced and regulated mortgage brokers will be operating in the market place as they are unable to meet the new requirements in terms of the official qualifications and Bank of Spain registration.

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New mortgages take hit in Spain Tue, 29 Oct 2019 16:06:59 +0000 New Spanish loan regulation takes its toll on August completions

Data published by the INE in Spain today outlined the impact of delays in completions caused by the new regulatory requirements implanted in June.

The INE takes its data from Land Registry rather than the Notary offices so can cause a lead lag on information as it takes between 4 to 6 weeks for the Mortgage in Spain to be registered.

The August figures will therefore reflect completions from July.

Banks in Spain not ready for changes

When the regulation was first made Law the Spanish Banks were not prepared for some of the changes. In order to meet the changes they had to update systems and delay completions that were offered but could not meet the new stipulation of a 10 day cooling off period from point offer was registered at Notary along with the visit by the borrower or their POA to the Notary office 48 hours before completion.

Not only were the Banks not prepared but neither were Notary offices.

There also remained confusion as to whether the 10 day cooling off period for a mortgage in Spain started when the Notary received a copy of the offer, whether it included weekend and whether it was in fact when the Notary loaded the offer rather than received. The changes in loan document requirements was one of the biggest  issues.

All of these factors had an impact and saw many completions delayed from the month they were supposed to complete.

With minimum fines for the Banks of € 60k for not meeting new regulatory legislation requirements no lenders were willing to wing it and all took their time to understand and implement the changes at the expense of a reduction in completions in the meantime.

Only now for November are we starting to see better levels of completions being booked in as finally new offers start to flow through.

2019 looks to be a difficult year

This means the year end numbers will be affected for lenders, although we may see a bit of bounce back in Septembers data as delayed completions from July trickled into August.

On top of the legislation changes for Spanish mortgages the non resident loan levels have been hit by a reduction in UK buyers who are unwilling to make a big ticket purchase and commit to a long term Mortgage in Spain until the outcome of Brexit is understood.

This trend is unlikely to change this year and the number UK borrowers in Spain will remain low.

In total 20.385 new loans were constituted down 29.9% on the same month of the previous year.

The average loan size was up 5% reaching € 128.501 against € 122.4k last August and € 121.4k in July.

For credits issued for buying of a home the number of new loans was down 38.9% on Julys figures, and the capital lent was down 35.3%.

Against the same month last year the capital lent was down 26.4%.

The large drop has affected the overall yearly accumulated figures and whilst both numbers and capital lent remain in positive territory these are now only 4.9% up on numbers of loans and 6% up on capital lent year to date.

Further affect of the drop was seen in the percentage of lending allocated for the purpose of buying a loan which only made up 58.8% of all new credit in comparison to an average of 65% of the total.

Interest rates fall

Interest rates for the month fell for all borrowing top 2.55% some 3% down on August of last year.

Rates for the purpose of buying a home came in at 2.29% for variable rates and 3.01% for fixed rates. The variable level was down 5.4% on last year and the fixed rates 1% lower than last year.

58.2% of all new loan contracts were taken on a variable rate and 41.8% on a fixed rate.

Hardest hit of the regions were Andalucia where numbers of loans was down 42.2% on last month and 34.4% on same month of previous year, the Canaries down 45.6% on last month and 49.7% on last year and Madrid down 37.5% on last month and 37.6% on last year.

Murcia took a big hit over Julys figures being 37.3% down but due to poor performance of the region last year was only down 20.2% over august of last year.

All regions saw a decrease in the month.

Whilst because of low numbers the cancellations of Spanish loans outstripped new loans the gap was maybe not as large as it could have been probably due to the fact that completions where the seller would have redeemed in the month did not happen either.

24.668 loan deeds were cancelled compared to the 20.385 new loan deeds constituted.

Middle East loan applicants in Spain

Other changes in the Month saw a number of Banks start to refuse to lend to applicants working and living in the Middle East due to the new change of currency requirement and confusion over what this means along with lenders becoming more cautious of UK borrowers due to Brexit. Some lenders Sabadell included are now looking at 60% loan to value as standard for UK based non resident buyers and a reduction in affordability ratios to compensate for further reductions in the pound to Euro exchange rates.

2019 will almost certainly be the most difficult year for Mortgages in Spain since the Banking crisis in Spain.

Hopefully during 2020 as Brexit is decided and its impact understood and as the new legislation is bedded in the market will improve.

For mortgage applicants the new legislation should mean they can at least expect a better level of transparency and advice than they were afforded before and mortgage costs for borrower have reduced considerably.

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Sabadell Bank drop Spanish loan to values for UK residents Tue, 15 Oct 2019 16:41:02 +0000 Sabadell fearful of Brexit impact

This week saw Sabadell Bank become the first lender in Spain to officially change its Spanish loan criteria for UK residents.

Whilst Sabadell throughout the Banking crisis maintained 70% loan to value for clients wanting a mortgage in Spain, who comfortably met their debt to income criteria, unlike others who dropped loan to values to 60%, Brexit has been for at least now the nail in the coffin for UK borrowers.

As of this week maximum loan to values for applicants from the UK has dropped to 60%. The lender has stated this a temporary measure until the impact of 31st October is known.

How long it will last is unknown but the Bank may just be the first of many who adjust their lending criteria based on a concern as to the impact of both a deal or no deal on sterling and the general British economy.

Mortgage in Spain loan to values why now

It is interesting that up until now they have made no adjustments, perhaps this was in a belief that finally it would not happen or that any deal agreed would not adversely affect the currency beyond where it is now, or impact on the economy.

Clearly something in the last few weeks has affected how they feel about the situation and what impact the final outcome may have. As a shareholder of the TSB network in UK they may be taking advice from their UK counterparts on anticipated impact.

Sabadell of all the lenders in Spain has always been the most aggressive on non resident borrowing. These changes will not have been taken lightly as they are very reliant for meeting budgets on the UK market.

It is difficult to see others not following suit and certainly it is the belief of Sabadell that they will be in line with the rest of the market.

Is 70% still available in Spain

There is of course a chance they have jumped too soon. Firstly there remains some 70% lenders for UK Spanish Mortgage applicants. There are less than they used to be but there are some in the Best Buy tables. To date we have had no indication that these will Carte Blanche change their terms and conditions they are just more prudent when granting the maximum70% loan to value and look at each application on a case by case basis.

Anyone requiring 70% to buy in Spain will at present need to have debt to income ratios below the lenders maximum, be able to show stability of incomes and be in an industry it is not deemed should be overtly affected in the short to medium term.

Some believe that the drop in sterling in the market has already been adjusted to reflect the UK leaving with a deal, the question for most is has sterling adjusted itself sufficiently for a no deal scenario.

Other lenders introduce more stringent risk assessment

Some lenders have already taken into account a further drop when assessing debt to income ratios so are using already, a like for like conversion when converting sterling incomes to euros in their risk assessment.

Many instead of giving a maximum 35% debt to income ratio are working off a maximum of 30% for the Brits and then expecting them to come in well below that for the full 70% to be offered.

It remains the case as we stand today that UK nationals can still obtain up to 70% loan to value but the pool is getting smaller and the hoops to jump through getting larger.

Have you been affected by the changes

If you have been affected by Sabadells actions, are committed to buying a property and need 70% to complete contact us now to see if we can help.

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Currency legislation affects Spanish Borrowing Fri, 11 Oct 2019 18:45:56 +0000 What is the legislation and how does it affect borrowing in Spain

One of the more negative outcomes of the regulation changes on Mortgages in Spain has been the interpretation of the legislation that allows borrowers to request a change of currency on their loan after completion if they don’t earn their income in Euros.

It is believed that the new law was to protect those who elect or elected to take a currency loan. In the past Spanish borrowers have been convinced to take out a currency loan without a full understanding of what playing the currency game may mean.

Many ended up owing more than they borrowed as the currency fluctuations went against them and in some cases Banks ended up technically having to pay the borrower for the loan when currencies went in the right direction for the mortgage holder.

It was also brought in it is thought to protect in the longer term Spanish nationals and EU Nationals who took a mortgage in their country, moved to another country to work and ended up being paid in a different currency to the original loan they contracted.

The key problem is that each Spanish bank is taking a different view on what the legislation means and the potential impact on them at a later date.

Negative impact of legislation on currency of earnings

Some have decided that that the loan legislation only applies if you are a EU citizen at the point you take the loan. This has potentially for UK borrowers meant that as current members of the EU they could request a change in their loan currency at a later date as they earn in sterling.

The impact has been that many lenders have now withdrawn for UK borrowers in Spain the ability to opt for a fixed rate. Fixed rates require the Spanish Banks to buy in long term funding, this funding is in euros so if at a later date the loan applicant requests a change of currency then the Bank may make a significant loss if the cost of funding this is more than the price they paid for the original funds.

Others have decided that they have sufficient capacity within their treasury departments to deal in other currencies such as sterling and have not withdrawn the ability for fixed rates to be taken.

Some lenders have decided they will only lend to applicants who earn the majority of their incomes currently in euros.

A few lenders have just stopped lending at all to non resident applicants who do not earn their money in anything other than major currencies.

Some banks have decided the law covers everyone not just EU citizens although why they have taken this view at such an extreme when other lenders have not is an example of how confused everyone is. Sometimes lenders just think the best way not to get caught out is not to lend at all.

One lender has a very complicated chart of who they will lend to and on what basis. This affects whether a loan can be secured but also on what basis. It depends on what nationality they are, where they are currently resident and what currency they currently are being paid in.

Loan offers in Spain being pulled at last minute

Over the last few weeks a number of mortgage applications made direct with lenders have been pulled at the last. Minute because the lender in Spain. has decided they can no longer lend in the situation of the applicant.

This has affected mainly applicants who live and work currently in Middle East or Far East and earn currencies which the lenders will not be able to deal with at a future date. As a for instance, an expat who is a British passport holder and therefore a EU citizen currently who works and earns currency in the Middle East will find that most lenders are not willing to lend at all. If they will it, in the main will be only on a variable rate.

An applicant who is not a EU citizen working and earning in Middle East and paid in Dirhams will find some lenders will not lend at all, some will lend but only a variable rate but most will have kept their previous criteria on lending facilities to a non European applicant as they do not believe the legislation allows for a currency change in first place.

In general, all be it on variable rate most lenders are maintaining facilities for those who earn their incomes currently in GBP, CHF, US and Canadian Dollars. For most of these applicants thought fixed rates will not be an options.

Possible solutions

Some developers in Spain who have sold off plan are now getting concerned their buyers may not be able to find solutions when it comes to closing.

The best way forward for Spanish non resident applicants, who have been affected by the changes and need a new loan agreed asap, or are now looking to apply for a mortgage and want to have access to everything available in the market is for them to gain access an intermediary who has the ability to look at a number of lenders and subject to status, can still get loans at the best possible loan to values and provide both fixed and variable rate options whatever the circumstances of the applicant.

Contact us

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July Home loans up in Spain Fri, 04 Oct 2019 10:33:13 +0000  

Current trends

Normal trends in Spain are for Julys figures to be below June.

This year the trend was reversed. This could be due to a number of delayed completions from June these being the Mortgages in Spain that fell foul of the new regulation requirements implemented mid June. The new regulations required changes to the offer documents and a cooling off period that meant some loan applications could not meet previously stipulated completion dates.

Average loan sizes and money lent

The average loan size was € 121.400 up from Junes € 120k and the down against last year of the same month when average loan size was € 124.5k.

In total for the purpose of buying a home 33,344 new deeds were registered at land registry up 11.15% over the same month of the previous year.

The total capital lent was 4.084mk up 12.9% over June and up 10.3% on last year.

The average loan size was 2.5%.

Spanish mortgages provided specifically for the purpose of dwellings made up 61.9% of all borrowings in the month. This is the average percentage level in Spain.

Fixed versus variable rates

The trend toward fixed rates which has been a major market place change in the last few years seems to have stabilise around the 43% level of all completions. Whilst there had been a big drive toward fixed rates the variable rates are very low at present and have been so for a long time and with no ECB interest rate increases seeming to be on the horizon applicants still prefer the variable option on many occasions.

Tracker rates have the advantage of being lower than current fixes and early repayment penalties are in general lower. Fixed rates provide long term certainty and prior to regulation changes allowed applicants, who also may have currency fluctuations to take into account, to only have to factor in one variable to monthly payments rather than two potential variables.

This has rather been negated by the fact many Spanish lenders will now not offer fixed rates to those who earn in currencies other than the Euro because of the requirement for them to potentially offer a change of currency at a later date. If the Bank in Spain has offered a fixed rate and bought in long term funds at one price and then have to change currency they could be left with a very high cost to the margin.

Benefits and drawbacks

Residents of Spain often take the view that fixed rates are only of benefit if they run the loan in the medium to longer term and that the likely hood of moving from a main residence within 5 years is higher than if the property is second home.

For these reasons the level of fixed rates contracted in comparison to Variable trackers seems to have plateaued.

The total average interest rate for dwellings for the month of July was 2.56% over a 24 year term. This was down 1% on last year.

For variable rates the average level is 2.28% down 3.4% on last year and the average fixed rate was 3.01% up 0.1% o same time as last year.

Calculate loan payments

After a few months of small rises the 12 month Euribor used for loan revisions dropped marginally for last 5 months but rose again very marginally to minus0.339% for revisions in October.

Andalucia region saw a better than average performance in July as did the Canaries.

The Balearics is behind on last years numbers but of a small base and Murcia whilst having better recent figures remains behind last years level which in themselves were very poor.

Madrid whose numbers were well up last year is struggling to build on this which may be why average loan sizes are lower than last year. Average loan sizes in Madrid and Cataluna are always higher than elsewhere in Spain.

UK borrowers lower but Scandinavian borrowers increase

UK buyers are not as prolific at the moment due to low exchange rates making a purchase much more expensive than a year ago and an unwillingness to take on such a large obligation with Brexit uncertainty.

Middle East based expàts are finding it difficult to get a lender post regulation changes and a few have found themselves with Spanish mortgage offers pulled at the last minute. There remains lenders that will lend but quite a few have changed their rules on dealing with certain nationalities.

Other nationalities like borrowers from Scandinavia, Belgium and Germany seem to be on the rise and are welcomed by all Spanish lenders as they are seen as stable earners and good payers.

Net inflow to mortgage books

Loans in Spain cancelled within the month of July reached 29,668 so with 33.334 new loans registered the lenders had one of the biggest inflows to their loan books for many years.

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European non resident borrowing Spain Mon, 23 Sep 2019 11:28:04 +0000 Whats affecting the loan market in Spain

Property sales to UK nationalities has dropped off in last couple of years over Brexit fears and uncertainty of its financial impact.

At the lower end of the price market due to the low price of property in many areas of Spain competitive mortgages in Spain things have held up as has the very top end of the market but the middle market is currently a tough one.

Any potential buyers in Spain who may be concerned about what will happen post Brexit in terms of access to their property should not be concerned if they are buying just for a holiday home. Spain sells property and offers Spanish loans to nearly all nationalities in the world. There is no reason why the UK population will be precluded from this in the future.

Still with such uncertainty buying a holiday home abroad and taking a foreign mortgage in Spain can be unnerving so it is of no surprise the market is quiet.

Scandinavian and other European borrowers

The Scandinavian buying market in Spain remains buoyant with many buyers from countries like Denmark, Sweden and Norway taking advantage post crisis prices and very attractive mortgage facilities and rates.

The same is true of Belgian buyers in Spain who are very attracted to, in particular Rural Spain.

Impact of New rules on currency loans

Loan facilities for all nationalities residing and working in a euro based country like Belgium or living and working where the Swiss Franc is the currency remain unaffected by changes to mortgage regulation whereby lenders in Spain must offer the facility to move the loan to the currency of their earnings at a later date.

This particular new rule has impeded other applicants where their nationality is within the eurozone but they currently reside in places like the UAE or in fact UK. This is because if you are a national of the EU at the time of application but working elsewhere the rule allows you to request another currency at a later date and some currencies the Banks in Spain neither can nor wish to offer loans in.

What happens when UK leaves EU

If the UK leaves the EU then no longer at application will they be from the EU and therefore the rule does not affect them and they cannot ask for a currency switch at a later date but for now they could so some Banks have changed what they can offer UK residents.

For those who are EU passport holders and work in other countries some Banks have stopped lending completely but in most instances it is not as drastic as this and all that has happened is that lenders will not offer them fixed rates only variable ones.

The rationale for this is that for a long term fix the Spanish Bank buys money at a price and has a commitment to that funding. Any changes to other currencies can seriously affect profitability down the line as the Bank has bought funds at a fixed price. With variable rates they have not made that long term commitment so can adjust more easily.

The new rule has been interpreted differently by each lender and until things settle down and there is some consensus on what the rule means it may be more difficult for certain residents to get lending and terms and conditions may be restricted.

Euro earners in Belgium and Germany

For the key current buyers Belgians, Scandanavians and Germans, wanting to take advantage of low interest rates and applying for a loan to buy ,lending facilities remain unaffected but with some significant differences on maximum loan to values and conditions of the Spanish Mortgage accessing a company who can trawl the market for them is still a good idea.

Loan Introducers must be registered

To protect EU mortgage applicants in Spain the new rules mean any intermediary placing applications on behalf of a client must have the necessary regulation, public liability and register with Bank of Spain.

This will reduce the number of individuals and companies who can operate a service of mortgage broking in Spain but those that remain will be experienced, knowledgeable and know the market well.

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Spanish loan levels dip in June Sat, 31 Aug 2019 10:13:23 +0000  

Latest news for mortgages in Spain issued this month

Loan levels in Spain dropped in June both against the previous month and the same month of the previous year.

The number of new Spanish mortgages registered dropped by 2.5% against last year with a total of 29.900 the average loan size dropped by 3.7% and the total level of capital lent for the purpose of buying a home dropped by 6.1%.

Against the month of May the decreases were more pronounced with numbers of loans being down 14.3%, average ,loan size down 3.4% and total capital lent down 17.2%

Despite the lax lustre performance total numbers of new home credits in Spain, average loan size and capital lent remains up for the year to date. It was however the highest drop month over month in June for over 5 years.

Lending under pressure in Spain

The last couple of months have shown that loan levels in Spain are under pressure. A number of factors have played a part in the cause of this.

Political uncertainly in Spain has certainly played a part. Madrid region is one of the worst performing regions this year and clear indication the home market is under pressure.

Most coastal regions favoured by the non resident purchasers are showing decreases or flat growth in latter part of year apart from Murcia and Valencia and Andalucia these being the only three regions still ahead annually over last year.

Brexit is having an affect both in terms of UK buyers holding off on buying decisions and other nationalities doing so in hope there will be an influx of cheap property after Brexit as retired expats sell up due to the drop in sterling and health care issues.

The Balearics was down 30.4% against May, Canaries down 19.15 and Cataluna down 20%. The lowest decrease was Murcia only being down 2.6%.

New mortgage regulation impacts on completions

July and August are unlikely to fair any better due to continuing concerns over Brexit but also due to new Spanish loan regulation which was implemented in June 2019 and prevented, due to legal changes, some mortgages in Spain from completing in the months of June and July.

The introduction of new cooling off periods, new document requirements which the Banks in Spain were not geared up to supply and the need for all mortgagees to attend Notary a minimum of 24 hours before completion meant many completions had to be postponed to a later date.

It is anticipated that the rest of 2019 will at best be flat at present it is difficult to see the last half of the year improving.

Whilst at present most lenders have not significantly changed their offering to brits it is becoming increasingly difficult to get the full 70% approved and some lenders have tightened their debt to income ratios from 35% down to as low as 25%.

Other changes under the new regulation have also had and continue to have an impact on how and under what circumstances an applicant for a mortgage in Spain can apply for a fixed rate. New laws on allowing currency switch at a later date, implemented to assist those taking a currency loan, but so badly written it affects all loans have meant many lenders will now only provide variable rates to those who do not earn their incomes in Euros.

Fixed rate access is reduced

After years of a shift to fixed rates mortgage product type and the stability this gives borrowers and lenders the new regulation is pushing applicants back to variable rates. In a market of low rates and Euribors at a minus level this is not an issue but could provide future instability in the Spanish mortgage market as rates rise in the longer term.

Instead of increasing choice, and protection for the consumer this particular part of the legislation is having the opposite affect.

Of all new credit flowing into the market 62.9% went for the purchase of a dwelling.

Interest rate averages continued to drop against last year.

The average term for a new loan is 24 years. Variable rates are down 6.1% on last year figures and were 2.29% in June. Fixed rates were down 1.3% and an average rate of 3.01%.

The 12 month Euribor has dropped marginally for the last 2 months against a back drop of the markets believing the EU base rate will not increase in the near future. As this continues interest rates will remain low and stable.

Next few months

Maybe also due to the Political situation in Spain along with concerns over a global and European slowdown cancellation levels were 27.624 so more new loans were constituted than those redeemed. Homeowners may be delaying decisions to upgrade or move until things settle down and it is likely as this continues that the lenders in Spain will start to see net outflows again for the rest of this year.

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The Impact of Brexit on the Spanish housing market Wed, 07 Aug 2019 12:35:22 +0000 If you’re looking into purchasing a property in Spain, you might be questioning wherever it’s the right time to do it. Brexit uncertainty is currently the number one issue that stops Brits from relocating and purchasing a property in Spain.

A lot of Brits seek to relocate to Spain each year, be it for retirement, to live a better life or to work.

During 2018, a total of 53,359 house purchases were made by non-Spanish nationals from around the world this is almost two in every ten property sales in Spain. British nationals make up the largest group of international buyers of property in Spain with over 7,613 purchases between January and June. This is a 13% increase since the start of Brexit referendum in June 2016.

What effect has Brexit had?

In this infographic provided by, we see the effect that Brexit has had on the GBP and what effect this could have had on the housing market.

However, British demand is directly driven by the value of GBP relative to EUR. This implies that the lower the value of the pound is, the less disposable income Britons have and the more expensive the property market becomes for them.

There has been a lot of uncertainty when it comes to Spanish mortgages, including the changes in the process, mortgage restrictions and future implications for Spanish property purchases.

Since Britons make up the largest portion of international property buyers, it would make no sense for Spain to overcomplicate the mortgage process, hence it is very likely that the Spanish banks won’t restrict British citizens from property purchase.

It is known that the only people coming from the blacklisted countries are unable to get a mortgage in Spain, and the United Kingdom has not been blacklisted. This also implies that getting Spanish mortgage post-Brexit shouldn’t be a problem.

On the other hand, there might be a change in future legislation. Current legislation allows European banks to opt-in for the debt collector services and chase up debtors in countries of their origin. It is currently unknown what will happen post-Brexit when the UK leaves the European Union as banks won’t be able to pursue debtors in the non-EU countries. Meaning that Spanish banks might need to implement the same risk assessment procedures for the UK citizens as for the non-EU citizens.

If you want to find out more about the Brexit impact, check out the source of the infographic

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