January loan data in Spain
Januaries reporting for Spanish mortgages was a mixed bag and good and bad news.
The difference between the numbers reported by the INE and the Notary offices in January were very large. Because each body draws its information from different sources there is always a difference between the two but in January this was more marked than normal.
The Notary offices, who report on completed transactions within the month, showed an increase of 30.3% year on year for the number of completed loans with a total of 11,884 new mortgages granted for the purchase of homes.
The average loan size was € 124.829 down by 3.1% on the previous year.
These numbers coincided with reported increase of 26.6% in house sales and a 2% increase in the price per square meter paid.
The numbers from the Notary offices differ from those from the INE who take their reports from land registry so loans actually registered within the month. This will include possibly loans completed from anything up to three months before and will also pick up some completed within January where the land registry office is perhaps particularly efficient.
INE overview of Mortgages in Spain
The INE statistics showed an increase of 10.6% in terms of new credits over the same month of last year and a total of 23.275 new mortgages in Spain granted and registered.
The average loan size at € 105.680 was in line with average loan sizes of the same period in the previous year.
Whilst the information from the INE is not as up to date as that from the Notary offices the information is more detailed and broken down into a number of factors and regional performance. In the longer term it gives a broader overview of what is happening in the mortgage market in Spain.
Why the news is mixed
In comparison to the preceding month of December the number of loans in Spain increased by 20.2%, the amount of capital lent was up by 17.8% but the average loan size dropped by 2%.
Whilst these numbers appear on the surface to be positive and continue to move the market in the right direction the increase in the numbers of loans between Decembers to January was the lowest for 4 years and the amount of capital lent was the lowest for at least 5 years.
55.3% of all credit into the market went toward the purchase of a home, this compared with 60.6% in December.
Fixed rates
Following on from the trend of 2015 toward a higher percentage of fixed rates mortgage product types, 10.2% of all home loans completed on a fixed rate basis. This compared to 9.8% in December.
With pressure being applied by the Bank of Spain for lenders to shift the emphasis to fixed rate lending we can expect this trend to continue in 2016. Spain has the highest percentage of variable rate products in Europe leaving both the Banks and the mortgagees exposed to interest rate hikes when they finally come. Fixed rate products will help stabilize the risk and improve the Banks earnings.
All lenders now offer fixed rate products and constantly review these to keep themselves in the game against their competition. Sabadell recently reviewed and changed their fixed rate portfolio having fallen a long way behind other lenders. With fixed rates being offered to non residents of Spain starting at 2.5% a 4.25% rate was never going to bring in the business the Bank needs.
Where the variable rate was contracted the Euribor was the favored index in 94% of the transactions.
Average interest rate dropped in January to 3.27% down from 3.5% in January of 2015.
Regional performance
Regionally the figures and news for Mortgage lending in Spain showed much disparity. The best performers in the month were the major Cities of Madrid and Valencia. Both regions performed well above the average in terms of both increases over December and increases over the previous year.
Of those regions where second homes and foreign investment makes up a large part of the market the results were not as positive.
Andalucía performed below average January over December but slightly above average for the previous year. The Canaries performed above average for January over December but fell well into negative territory when compared to January of last year. Murcia performed well below average on both counts and rate of growth slowed considerably in the Balearics.
Whether the lack of political stability in Spain and a nervousness around whether the UK will stay in the union is delaying purchasers committing or looking to take finance, is affecting growth in these regions will unfold over the coming months.
Spanish Banks
One area of good news for the Spanish Banks was that the gap between the amount of loans cancelled and new loans constituted feel in January with only 885 more loans cancelled than new loans granted.