This is the first real sign that the Banks are looking to start re-building mortgage books rather than actively seeking to reduce them.
Why it is important Banks lend money
The last three years have seen a month on month decrease in the amount of capital outstanding on the books of Banks in Spain, as all lenders have sought to reduce their exposure. A continuation in this direction would eventually put extreme pressure on future earnings, as Banks fail to attract new clients with the hook of a mortgage.
Every Bank needs to finally lend to ensure their customer base expands in the long term, allowing the Bank to market existing customer bases for other products.
What changes have Bankinter announced
Bankinter have dropped by a very small amount the margin charged to most international clients moving from 3.8% above Euribor to 3.75% above. Where the changes are more dramatic are both for clients originating from Scandinavia and Switzerland, where margins have dropped from 3.8% above to 2.5% above. Margins for residents of Spain which were averaging over 3% are also dropping to a standard 1.95% above Euribor, where the property is to be the primary home, and the value is above € 150.000.
Why are the margins for Northern Europeans dropping by so much
At present due to the strong economic performance of, in particular the Scandinavian countries, applicants from these areas are seen as a good risk. Buyers from Sweden, Finland, Denmark and Norway are at record levels presently as their citizens are feeling secure financially and because their currencies are performing very well against the Euro making the overall cost of buying in Spain historically low. Having a home in the sun is now seen as very attractive particularly when adding into the equation the drop in real terms of prices in Spain.
Operating in Spain and able to offer Spanish Mortgages are also a number of Scandinavian Banks like NY Kredit. These banks who fund their mortgages, often by way of bonds, have kept their margins very low, at a time when Spanish Banks have had very high margins precluding on most occasions banks in Spain from accessing this lucrative market.
Is this good news
Yes is the simple answer. It is important that the mortgage market in Spain becomes more cost effective and accessible if Spain is to move forward economically. Sales of holiday homes and life style aspirations whilst contributing to the bust of recent years is also one of the backbones of Spanish fiscal recovery.
Whilst it is not to be anticipated that all Banks will follow suit immediately, as one Bank starts to lend more competitively again it naturally follows that others will look to do the same or risk losing quality market share.
How quickly will we see changes
The last couple of weeks have seen some positive signs. BBVA announced they expected to see lending increase in last quarter of 2014 and the BBK group which includes Caja Sur came back into the market with a non resident Spanish Mortgage having withdrawn from this type of lending some 2 years ago. The signs are there that 2014 will see changes for the better across the whole Spanish mortgage market.