The last few weeks have seen mixed messages coming out of Spain and the Spanish Mortgage market.
Bancaja who reduced loan to values to 60% at end of last year and removed interest only have in recent days said that they can consider on a case-by-case basis up to 65% loan to value for non-residents. This relaxation is possibly in response to a collapse of their non-resident applications and reverses a trend for them of increasingly tightening criteria’s.
Deutsche bank also announced last week that they have relaxed their criteria from 50% loan to value to 60% for non-residents.
Sol Bank conversely have; whilst keeping their 70% option; increased rates. They have incorporated a first year rate of 2.75% followed by Euribor plus 1.15% this is up from the previous 0.95% above Euribor with no first year rate incorporated.
It remains the case with all the banks with the exception of Lloyds/Halifax that life insurance is being insisted on. All Spanish banks need to cross sell other products to prop up incomes and profitability and whilst it is not legal to insist on other products are now digging in their heels whenever approving a loan. Most Spanish Banks have no access to wholesale funds to provide loans so are very reliant on lending the deposits they have and profit from other income streams. It is also still the case that even where funds come from wholesale markets the price the banks have to pay for this money and the rates they can charge leave little actual short-term profit on lending.
More and more banks are starting to offer special mortgage terms for clients buying bank stock although promotion of this remains poor except where banks are promoting the offers to Spanish Nationals.
The trend for Euribor rates last month was upward and whilst these increases are very very small we seem to have hit the bottom on the Euribors with the trend of downward movement at the very least stalling. This does not mean we will see big increases in the various Euribor rates but small and steady increase across the board during the next few months.
All in all the news is a mixed bag with some positives and some negatives. I suspect this trend will continue as each bank assesses their own current market position and balance sheet strength with no clear consensus amongst banks as to the overall way the market is moving.