Mortgage Market Indexes in Spain

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Key Spanish Mortgage Data

Monthly mortgage figures for January in Spain showed no respite in the overall decline in mortgages constituted in Spain.

January’s figures will still be affected on a year on year basis by the fact an unusually high level of purchases and subsequent mortgages were constituted at the end of 2012 due to the conclusion in 2013 of tax breaks for buyers but never the less were lower than anticipated.

Key data included a decline by 32.4% of number of mortgages in Spain registered in January 2014 to January 2013 and a slightly lower differential between the numbers of mortgages granted between December 2013 to January 2014 and the number granted between December 2012 to January 2013.

In January 2013 the numbers of Spanish loans granted were 46.3% higher than the month of December 2012, in January 2014 the number of loans granted were only 41.6% higher than the month of December 2013 and this was off the back of an overall decline in numbers throughout 2013.

The level of capital granted reflected the same trends.

Interest rates and changes to existing loans.

The average loan size rose slightly in comparison to the previous month up to € 101.6 a small increase of 1.3%.

93.2% of all mortgage product types granted were on a variable rate with only 6.8% of loan granted being completed on a fixed rate. The average interest rate across all types of loan was 3.88% and the average term 20 years. The average interest rate on residential properties was higher at 4.14% in comparison to an average rate of 4.06% in the same month of the previous year.

For changes in terms to existing loans Novaciones and subrogation figures were down on the previous year except in the instance of the loans being changed due to repossession where there was a 53.1% increase in the number of loans being subrogated to creditors.

Regional variations and residential mortgages

All regions of Spain saw a year on year drop in mortgages granted apart from the region of Navarra.

Numbers of new Spanish mortgages granted for residential properties totaled 17.464 and the number of residential mortgages canceled totaled 25,953 another month of net outflows across the Banks mortgage books.

2014 Outlook

A recent survey by Fitch ratings agency predicted little change to the overall mortgage picture in 2014 despite the Spanish Banks looking this year to open credit back up.

Arrears levels for the one to two month in arrears have dropped slightly from their peak in the 4th quarter of 2013. The volume of new defaults held at 1.7% for a second quarter showing some signs of stabilization in new arrears coming onto the books . The level of loans in arrears by 3 months plus continued to rise.

The total percentage of nonperforming loans 3 months in arrears or more in quarter 4 of 2013 hit a new high of 3.6% despite the stabilization for two quarters of the two month and less in arrears category. Overall stock of nonperforming loans continued to increase hitting a new peak of 6% in the last quarter of 2013.

The level of constantly non performing loans that originated from high LTV loans and broker sourced is higher as perhaps excepted than those loans sourced directly by the banks and at lower loan to values.

Sale of repossessed property and house prices

Repossessed properties sold in 2013 by the Banks were sold at 71.5% below the properties original valuation level . This compares to an average drop from valuation to sale price of 48.3% since 2009. The profound drop in sale price achieved is partly due to a more realistic standpoint by Banks who are now willing to sell at well below the original valuations in order to move stock from their balance sheets.

Overall house prices across Spain have dropped by 36.2% and Fitch expect this drop to continue all be it a lawyer pace throughout 2014 and to level out in 2015 at 40% below the peak before the trend is reversed. The numbers reflect the national situation and within this are some areas where prices seem to have already reached the bottom this includes areas like the Balearics and pockets within the Costa del Sol. Buying in Spain has seen some recovery in the non resident market.

Conclusion

Fitch expects the level of non performing loans to bottom out in 2015 as unemployment declines from its 2013 peak.

Fitch believes that mortgage availability and demand will remain low during 2014 due partly to increase in mortgage margins and lower loan to value availability. This may be correct but at ground level Banks have targets this year. The first quarter information from the Spanish Banks is that targets have not been met despite higher levels of front end activity.

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