Blog – Spanish Mortgages https://www.imsmortgages.com Personal and Professional information service Wed, 28 Oct 2020 15:49:37 +0000 en-US hourly 1 https://wordpress.org/?v=5.5.3 Spanish Mortgages take a hit August 2020 https://www.imsmortgages.com/blog/spanish-mortgages-take-a-hit-august-2020/ https://www.imsmortgages.com/blog/spanish-mortgages-take-a-hit-august-2020/#respond Wed, 28 Oct 2020 15:49:37 +0000 https://www.imsmortgages.com/?p=3482 New Spanish loans drop through the current Pandemic

Whilst on the face of it the August numbers don’t look too drastic you have to also look at 2019 over 2018 to see the true picture.

Last year from June the numbers of mortgages in Spain completed reduced significantly because of the introduction of new regulation and requirements for the lenders that caused a significant amount of loans to be delayed in completion or offers withdrawn.

This meant in August last year Spanish mortgage levels dropped by 39.2% against 2018. This year in August the number of new Mortgages in Spain have dropped a further 3.4% against same month of last year which means in total there is 42.9% less completions in the month than 2018 figures.

August also showed a drop in numbers against the month of July down 23.8%.

Year to date figures no longer look positive

Year to date from a positive start in January and February the number of new loans in Spain is now down 10% against the levels of last year capital lent now down 2.2% due to average loan size being up year on year by 8.6%.

Capital lent whilst down 22% on last month was actually up 0.5% on same month of previous year due to a higher average loan size but this must be set against the fact that last year capital lent fell 35.2% from the same month in 2018.

Average loan sizes were up 4% on last year, up 1.8% on last month at € 134.678. This itself may come under pressure as the years figures progress as Banks become more cautious about loan to values and the possibility of house prices dropping as the economic situation worsens.

Interest rates remain low

Interest rates remain very stable and are possibly the only positive for the general market. The average interest rate in August over a 24 year term was 2.49% this was down from 2.54% on the month of July and down from the 2.56% of the same month in 2019.

For the first time a few months variable rate product types outstripped fixed rates with 50.6% of all new loan deeds completing on a variable rate basis and 49.4% on a fixed rate basis.

Borrowers may be encouraged at present to take advantage of the fact that it is highly unlikely the 12 month Euribor to which variable rates are linked is likely to rise in the short to medium term future and forgoing longer term stability for lower starting rates. Best Buy tables show little reductions or increases in product criteria.

The average variable rate was 2.18% and the average fixed rate over the same term 2.87%.

Tourist regions hit the hardest

Regionally no-where is seeing any long term growth but some regions have been hit harder than others by the situation.

Those regions below the average drop in numbers  include

Balearics down 32.96% on last month

Cataluna down 36.7% on last month

Valencia down 38.6% on last month.

All three being big tourist areas are suffering from the lack of foreign buyers in Spain and the impact of a quiet summer putting pressure on those that live and earn there.

Regions performing slightly better than average include

Andalucia down 19.8% on last month and 3.4% on last year

Canaries down 12.9% on last month and actually up 55.9% on same month of last year

Madrid down 20.2% on last month and only down 6.1% on last year

Murcia down 18% on last month and up 3.2% on last year all be it off back of a very small number of transactions.

Spanish Banks see net reduction in their loan books

In total for the month 20.535 were redeemed or cancelled so for the first month in many the Banks in Spain saw a small net outflow to their mortgage books. It can be anticipated this may be the trend for the next few months.

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Loans in Spain decline in July 2020 https://www.imsmortgages.com/blog/loans-in-spain-decline-in-july-2020/ https://www.imsmortgages.com/blog/loans-in-spain-decline-in-july-2020/#respond Mon, 28 Sep 2020 17:59:34 +0000 https://www.imsmortgages.com/?p=3464 Further declines in Spanish Mortgage business levels

As expected Julys loan data in Spain shows a further decline both month on month and year on year.

Given the overall situation the figures could have been a lot worse and we may as yet see further declines as the year progresses.

The non resident Spanish mortgage in market in terms of actual completions is at a virtual standstill. Unless the applicant was already committed to a purchase, bought off plan and completion is due and has in place a power of attorney to complete for them, due to travel restrictions most have been unable to select a property.

Approved loan applications remain buoyant

Actual approved applications of potential buyers just waiting for a point when they can search for a property are still amazingly buoyant but at present they are stuck as just that approvals for lending and no property to buy.

The residential market saw an up tick in completions when lockdown finished but with adverse conditions in Spain it is difficult to see this continuing as people become more rather than less nervous about their job situation and the overall economic impact on Spain.

No Government help to kick start Spanish housing market

Unlike the UK there has been no short term encouragement from the government by way of reduced purchase taxes and given these are regional rather than national it is unlikely to happen.

Madrid hardest hit region with COVID  had already moved purchase taxes to 6% from 8% after the banking crisis and other regions either held the same or increased them despite low activity at that time so its difficult to see any positive action this time round either.

Spanish Banks play a waiting game to assess impact

At present whilst the Banks in Spain are cautious little has happened to general risk criteria again it may well be that in the coming months risk criteria tightens as the economic fallout becomes tangible.

Average loan size in Spain the only area of increases

The average loan size in July increased against the same month of last year by 8.9% and reached € 132.3k. This was also up slightly on the previous month.

The number of loans registered in the month were 26.014 down 2.7% on June and down 23% on same month of 2019

Capital lent was down 2.2% on June and down 16.1% on July last year.

Year to date after a good start to year the number of new loans is now down 10.5% against last year the level of capital lent is down 2.5% and average loan size up 9%.

Rates stable

Interest rates remain very stable. The average rate for completion in July was 2.54% over a 23 year term. This was from 2.49% last month but down from the 2.59% of the previous year.

The average variable rate was 2.27% and the average fixed rate 2.86%.

52.5% of all new loans in Spain were on a fixed rate mortgage product type and 47.5% on a variable rate.

For some months now despite the Euribor being held in slightly minus territory the majority of mortgage applicants are opting for a long term fix.

All regions are seeing a decline in business with 2/3rds dropping below the median decrease.

Spanish Lenders come under renewed pressure to merge

Cancellations in the month were 25.366 so the Spanish Banks are still seeing net in flows to their mortgage books.

As the pressure continues we may see more and more consolidation of lenders and Banks in Spain. Caixa Bank and Bankia look set to merge and despite this reducing options considerably politically it is being encouraged. Bankia are still partially state owned so it is most likely Caixa Bank will be the dominant force which is not necessarily good for borrowers as Caixa Banks focus and criterias are not as good as Bankias.

Other Banks will come under pressure to strengthen their base and we may see more mega mergers as the months progress.

 

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Lending in Spain improves June 2020 https://www.imsmortgages.com/blog/lending-in-spain-improves-june-2020/ https://www.imsmortgages.com/blog/lending-in-spain-improves-june-2020/#respond Fri, 04 Sep 2020 13:54:33 +0000 https://www.imsmortgages.com/?p=3405 Spanish Mortgages for June

In June towards the end of the lockdown in Spain lending figures suggest activity increased over the previous month

In total 24.748 new Spanish loans were constituted and registered at land registry most of which will have related to signing at the Notary from May.

This level was down as would be expected on June of 2019 by 12.7% but up 4.7% on the previous month.

July may recover over last year

It will be interesting to see what happens to July figures against the previous year as July and August last year were very poor months for completions due to the implementation of new Spanish mortgage regulation that delayed a vast amount of completions due to Spanish lenders not being prepared.

 

June key statistics

The average loan size in June was up 7.5% over the same month of the previous year and came in at € 131.6k. This may suggest that borrowers in well paid secure jobs or the more affluent are still buying property and taking loans and those buying at lower levels are less inclined to move with so much doubt over long term implications of the situation at present.

In May 2019 average loan size was 122.5k and in May 2020 it was 127.1k so June was increase of 3.6% against May..

Total capital lent was up 8.5% against May 2020 but down 6.1% against same month of previous year.

Year to date loan levels now down

Year to date the impact of COVID can be seen.

In total year to date the number of new Spanish loans is down 8.4% against the same period of 2019, Capital lent down 0.1% due to a large hike in average loan size and average loan size up 9%.

Of all new credit flowing into the market 64.25 was lent for the purpose of buying a home.

Only 4.8% was designated for buying land suggesting developers have put the brakes on for a while.

In more normal times which neither 2019 or 2020 are the trend for June over the month of May is normally to see a decrease in mortgage activity. In 2019 the decrease June over May was minus 13.1%.

Interest rates continue to fall

Interest rates continue to move downwards although by small percentages.

The average interest rate for June was 2.49%. This was made up of average variable rates at 2.14% and average fixed rates of 2.88% over a 24 year term.

Fixed rates formed 50.4% of all new contracts as the favoured mortgage product type and variable rates made up 49.6% of all new contracts. The current uncertainty is pushing people to long term security on rates and contracting of long term fixes which provide good value for money at present.

Holiday home regions hit hardest

Regions hardest hit on activity include those popular with non resident buyers buying holiday homes like Andalucia down 27.2% over last year, Canary Islands down 19.2% and Valencia down 32.8%.

Madrid interestingly showed a reasonable increase June over May and was one of a handful of regions doing so despite the difficulties in getting to Notary for signing.

Spanish Bank still in positive territory

In total there was also far more movement on cancellations and redemptions with 20.137 loans being cancelled or redeemed within the month compared to only 12,000 in May.

This still left the Spanish Banks with a net inflow to their mortgage books.

New mortgage applications showing increased activity

In terms of upfront activity the level of mortgage enquiries has steadily increased since lockdown finished with August being unusually busy.

There are much higher levels of borrowers going through the mortgage application process in anticipation of looking for property in September and October. At present restrictions in place by the UK government in particular and warnings from other Governments like Germany has meant that the potential buyers whilst organising their lending requirements may find that it is early next year before they can realistically consider visiting Spain and securing a property.

Completions are still happening and those delayed by the lockdown are starting to make their way to Notary, Vendors and developers are now pushing hard to get committed to sales finalised.

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New refinance product for Spain https://www.imsmortgages.com/blog/new-refinance-product-for-spain/ https://www.imsmortgages.com/blog/new-refinance-product-for-spain/#respond Wed, 26 Aug 2020 17:58:35 +0000 https://www.imsmortgages.com/?p=3396 Equity release for Spanish property

A UK fund via a Private Bank has recently launched a new lending product for the Spanish Market.

The product has been set up to Fill a gap in the market not covered by Spanish Banks and with more flexibility than some of the Private Banking options already available in the market.

No Spanish Bank can set up a mortgage in Spain on an existing property and allow for funds to be taken out except in very limited circumstances so for improvements to the property itself or to help with buying another property but only in Spain.

Interest only loan in Spain

Loans with Spanish lenders are always repayment.

Private Banks will offer mortgages in Spain on an interest only basis normally with some capital reduction each year but will only release funds to invest with them. They have their place as they help with IHT planning and wealth tax but do not provide flexibility to utilize funds for other purposes.

The new product does require as all Private Banks do that money is under management with them for you to access their facility but the level is considerably lower than with other providers and up to 70% can then be released from the property in Spain.

Minimum value of property must be € 2.5 million.

Product terms and conditions

Up to 60% loan to value is available on an interest only basis with a 5 to 10 year term or up to 70% on a repayment. Basis over 15 years.

To access the product the borrower must have a private banking commitment to the lender of a minimum value of € 1m. This can be taken from the funds released or can be an existing portfolio moved to them.

General returns depending on risk profile are between 3 to 7%.

All lending requires proof of income and the client will need to show ability to support loan with a criteria of 3 to 3.5 times gross income.

What can released funds be used for

Funds can be used to purchase other assets in Spain or elsewhere and other reasons like investment into a business. Each application in terms of viability and use of funds is looked at on a case by case basis.

Interest rates linked to 3 month Euribor

Interest rates are 2.5% above 3 month Euribor but a 1% discount is given for the funds under management so net rate 1.5%. The 3 month Euribor will never be considered to have dropped below 0%.

Unregulated lending

With the new product lending is unregulated so does fall under the new Spanish Mortgage regulation of 2019.

This means that whilst the loan is secured in the normal manner the lender is not obliged to and does not cover any of the costs associated with the loan.

The borrower will be required to cover Mortgage deed tax AJD which is around 1.8% of borrowing, the Banks legal and due diligence fees surrounding securitisation along with an arrangement fee and valuation fees.

Total arrangement fees including intermediary fees will be between 3 and 4% of lending.

Arrangement costs

Other fees including land registry, notary and valuation fees are on top of this and total costs of acquiring the lending in Spain will be between 8% to 10% of the loan.

Whilst the set up costs are high they are no higher than bridging finance in Spain and rates are considerably lower with a guaranteed term unlike bridging which is normally maximum 24 months.

Loan to values at 70% are higher than bridging finance and overall the lender does not require the same level of upfront commitment as others in the market.

The product is for release of equity only it cannot cover new purchases at this point although of course it does allow for equity release to purchase another property.

The loan can be dealt with in a company name or personal names depending on how property is held and all nationalities are considered.

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Off plan purchases mortgage risk in Spain https://www.imsmortgages.com/blog/off-plan-purchases-mortgage-risk-in-spain/ https://www.imsmortgages.com/blog/off-plan-purchases-mortgage-risk-in-spain/#respond Thu, 06 Aug 2020 17:39:23 +0000 https://www.imsmortgages.com/?p=3331 Buying off plan.

When buying off plan in Spain you are securing the right to buy at completion of the construction. The contract means that whilst you have the right to buy and will pay staged payments to the developer during the building phase as agreed you do not actually own the property or any part of it until the day the deed is signed and the property bis handed over.

In some countries it is possible if you are buying off plan to get a mortgage agreed and guaranteed for completion and in some instances the loan can contribute toward the staged payments.

In Spain with a Spanish Mortgage this is not the case.

How does the funding process for off plans work in Spain

It is not possible to either raise funds to make the staged payments with a Spanish lender nor to obtain for a future completion a guaranteed mortgage for completion.

If the construction is only 3 to 4 months away form being built it is possible as it is with a resale to get a mortgage in principal agreed that would still be valid for the time between when it is agreed and the property is ready to be valued and signed over but anything over and above this the approval would no longer be valid.

Risks associated with buying off plan

Whilst if you have an underwritten fiscal approval updating and re-instating this is possible with relative ease and provides some level of comfort that the loan will be forthcoming should anything g change in terms of the borrows situation or indeed Spanish Bank criteria then there could be a situation where the approval could not be updated.

This means committing to buy an off plan property, paying over any level of non refundable staged payments becomes a big risk if it is absolutely necessary to have borrowings to complete and you have no other means by which you can raise those funds.

Mortgages in Spain are not guaranteed for unbuilt properties bought off plan. For self builds where you own the land there also remains some risks but construction loans do work differently.

A loan in Spain for completion of an off plan purchase should be a preference not a necessity if you want to make sure your deposit monies are not at risk.

Even if a developer tells you that there is guaranteed Bank mortgage for completion this does not mean guaranteed in the truest sense of the word.

All it means is there is an agreed level of funding attached to the property which will be available at completion as long as the purchaser fits Bank criteria at that point, and the Spanish Bank is still lending at that point .

Developers loans do not mean guaranteed funding

Many off plan purchasers found out to their cost back in during the financial crisis that guaranteed did not mean guaranteed for them.

Things can and do change

Whilst it is unlikely we would see again a Banking crisis of the magnitude of 2007/8 where Banks in Spain ran out of capital so could not lend what can and does happen on a more regular basis is that changes brought about by for instance things like Brexit, COVID 19 or a general downturn in the economy of either Spain or the country the borrow is resident in is that Bank criteria changes.

A British buyer who a year ago qualified for instance for a Sabadell loan because their debt to income ratios were 38%, loan to value 70% might now struggle because debt to income ratios are 25% and loan to value 60%. A UAE buyer who committed to buying before the new Spanish regulation put in place last year will now find many lenders including possibly the developers loan are refusing to lend because of the currency they earn their income in.

Whilst other options may be available for these buyers for some it will not be. Contact us today, if you have been affected by this issue

Because of these potential changes and fluctuations no lender will give a guarantee offer of lending that lasts for the time it takes a new property to be built.

Generally speaking a fully underwritten fiscal approval subject to valuation will be valid for 3 months and a full offer of lending 1 month. Whilst it is unusual for this to be withdrawn or not re-instated after it has been gained it is not a 100% guarantee it will be.

Most developers require a minimum of 20% down payment during construction and this can be anything from 20% to 50%. To agree to this without knowing exactly how you will find the funds to complete is putting at risk some significant amounts of your money.

It should also be borne in mind that the lender will finally offer a percentage of the original purchase price or valuation but the lower of the two.  It should also be considered that they will not allow you to take back any funds paid over to the developer already so if you want a 70% loan but you have a 40/60 payment plan you will only be able to get a 60% loan at completion.

It is possible to minimise the risk by making a mortgage application before you commit to buying something off plan so you can at least be sure that if you were able to complete now you meet current Bank criteria, and the fact already an underwriter has signed off the loan may help but it is not going to remove the risk completely.

Who can safely consider buying off plan

Buying off plan can have its benefits both in terms of what finally, when built the property may be worth, you should, although again not guaranteed see some growth before completion and It often means you can select from a range of finishings to suit your needs However in reality it should only be considered by cash buyers who would prefer not to finally use their savings or those who have other ways of raising the funds than just doing so as a non resident in Spain.

For those mortgage applicants where this is not the case better advice is to stick to resales or nearly completed new builds so the Spanish mortgage process can be undertaken with certainty of funding be in place for completion without putting at risk your deposits.

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May 2020 Spanish Loan figures https://www.imsmortgages.com/blog/may-2020-spanish-loan-figures/ https://www.imsmortgages.com/blog/may-2020-spanish-loan-figures/#respond Tue, 28 Jul 2020 18:49:04 +0000 http://www.imsmortgages.com/?p=3313 May 2020 loan numbers down on last year

Data issued this month for Mortgages in Spain for May showed a large decline against the same month of last year but small increases in the situation over April.

The data is a little surprising given the lockdown situation during April which is what Mays figures are likely to reflect and the fact that land registry was closed during this period.

It was expected that Mays mortgages in Spain figures would show a decline over Aprils which would have reflected completions from February and March before worst of Virus crisis.

 

Cancellations less than usual

In terms of Spanish mortgages being cancelled within the month the figures were on par with previous month and well down on normal levels. These figures look to be in line with what is expected as less people would pay off their loan or move during this period.

If the numbers are accurate whilst Spanish lenders will have volumes well behind last years they will have had for two months a net inflow onto the mortgage books.

Contracts registered at Land Registry

In total 25.538 new loan deeds were registered within the month at land registry. This figure is not by any means catastrophic.

This was a 7.1% increase against Aprils figures but down 27.6% on the same month of 2109.

The average loan size held up well plus 3.2% on last month and up from 123.2k for same month last year.

Capital lent was € 3.247 mk up 8.7% on last month but due to decrease in number down 25.35 on last year.

For the accumulated year to date the number of new loans is down 7.69% but the capital lent up 1% this is because the average loan size has increased by 9.3% according to the statistics.

Normal conditions

Under normal conditions you would expect to see an increase across all figures May over April more in the region of 20% rather than the 7.1% registered so there is a clear impact on activity but perhaps not so profound as it could have been.

Last year June and Julys figures were very poor due to cancelled and postponed completions affected by changes in Spanish regulation and the Spanish lenders not being prepared for these changes so next months figures may in fact yet exceed the previous year.

Rates of interest stable

Interest rates remained stable at an average completion rate of 2.48% of this variable rate average was 2.12% and fixed rates for a 23 year term 2.87%.

For a second month fixed rates out performed variable rates as the chosen loan product type by borrowers with 47.2% being taken on a variable rate and 52.8% on a fixed rate.

Andalucia takes a hit

Regionally the figures again have many anomalies the Canaries were showing a 90% increase on the previous months completions, Madrid was up over April despite lockdown but all regions were down on same month of last year.

Andalucia was particularly hard hit down heavily on last month and last year.

New loan enquiry levels high

New enquiry levels are high but only with potential borrowers considering buying. Very few actual purchases seem to be happening at present. For foreign buyers many are waiting to make a viewing trip much of which has been put on hold due to the UK and Norways decision to insist on self isolation for two weeks on their return.

Covid cases look to be climbing in Europe as it opens up so the next few months will continue to be hard ones in the real estate and lending industry in Spain.

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COVID 19 impacts on 2020 Spanish Mortgage levels https://www.imsmortgages.com/blog/covid-19-starts-to-impact-on-2020-loan-levels-in-spain/ https://www.imsmortgages.com/blog/covid-19-starts-to-impact-on-2020-loan-levels-in-spain/#respond Mon, 29 Jun 2020 20:38:05 +0000 https://www.imsmortgages.com/?p=3304 April 2020 Spanish loan data

Aprils Spanish loan figures started to show the impact of the lockdown on the numbers of new loans constituted in the Month.

Mays figures will almost certainly be lower again and it will take a few months for good levels to return.

On the positive side for the lenders in Spain the amount of mortgages in Spain being redeemed has dropped by a higher amount than the new loans being completed.

Why are there less loan redemptions

For most Spanish citizens paying off chunks of an existing mortgage and or moving and making a new commitment is something they may well postpone until a degree of normality and the full economic impact is known.

This means using savings to pay up a loan or moving house may well be delayed until there is more certainty so large outflows to the mortgage books as suffered during and after the financial crisis will not be as high.

April stats

In April 23.840 new loans were signed down some 18.4% on the same month of the previous year.

The average loan size dropped by 1.2% coming in at 125.338 and capital lent was down 11.4% on last year.

In terms of against last month the number of loans was down 9.6% and now down 2.1% year to date, Loan size was down 2% and but still up 10.4% year to date and capital lent down 11.4% on last month but up 8.2% year to date due to the higher average loan size.

In April 63.6% of all new credit in the market was lent for buying a home, this will probably remain at these sort of levels as commercial lending will almost certainly be hit harder than residential lending.

Interest rates Spain

Interest rates remained stable the overall average rate for a 24 year term was 2.48% down on March level. Of this the average variable rate was 2.13% and the average fixed rate 2.86%.

As possibly a reflection of new borrowers wanting some future certainty fixed rate products made up 51.6% of all new contracts and has overtaken variable rates. Given 5v years ago they made up less than 5% of all new contracts the shift in mortgage product type in Spain has been vast.

Madrid feels the pain

Madrid suffered in the month as expected down 9.6% over last month and down 27.5% on last year the canaries was down 31% and 36.8% respectively but Valencia and Murcia bucked the trend with Valencia only dropping 1.1% on last month and 7.7% on last year and Murcia down 10.3% on Marc h but up 19.4% on April of last year and Andalucia was actually up on March by 6.88% but down on last year by 7.6%.

New Spanish Mortgage enquiries increase

New mortgage enquiries have been relatively buoyant since the beginning of June after 6 weeks of nothing at all. As things start to open up non residents wanting to start looking at buying in Spain again has improved.

Whilst the upfront numbers show some positivity in terms of the loan application process it will be some time before any of this comes to actual business for either brokers or the Banks.

It is still very difficult for potential buyers to visit Spain and actually look for property and many feel prices may drop so whilst they are starting to look at the possibilities they may still defer any buying decisions until much later in the year.

At the moment it appears that by quarter 4 activity levels should recover but this is still subject to what happens in the coming months in terms of economic impacts and danger of a second wave and further shutdowns.

UK citizens seem focussed on doing something before end of year so to have secured a property in Spain before Brexit finally happens but this is still fragile in terms of its certainty as whilst there desire may be to buy before Brexit other factors will play a part in whether this is possible for them.

We can expect and is probably the only certainty  this year that the year will remain a difficult one for everyone.

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Lending in Spain starts to feel lockdown affect https://www.imsmortgages.com/blog/lending-in-spain-starts-to-feel-lockdown-affect/ https://www.imsmortgages.com/blog/lending-in-spain-starts-to-feel-lockdown-affect/#respond Mon, 01 Jun 2020 16:47:33 +0000 https://www.imsmortgages.com/?p=3283 Mortgages in Spain decrease in month of March

Spanish lending data for March published at the end of May started to show the affects of the lockdown. March completions will in general relate to activity in February so the drop is significant but as yet not a reflection of how low it will go.

The real impact on Mortgages in Spain should show up in next months figures.

New Spanish loans drop significantly

The number of new mortgages in Spain constituted in the month reached 26.382 in the same respect the number of loans cancelled was 24.894 so these were lower as well meaning the Spanish lenders saw a net inflow of business in the month.

The number of Spanish mortgages was down 14.6% on the same month of last year and down 26.8% on the previous month.

The average loan size for a Spanish Mortgage after last months blip was down 27.4% on last month and up 1.6% on same month of last year.

Capital lent was down 46.9% against the previous month and 13.3% against the same month of last year.

Residential loans feel affects first

Possibly unsurprisingly the amount of new loans granted for buying houses only reached 58.6% of total new borrowings so business lending was not as heavily affected in the month.

The average interest rate was down from 2.64% last month to 2.56% of this the average variable rate was 2.21% over 24 years and average fixed rate for same term 2.99%.

Fixed rate products market share increases

Fixed rate product types for the first time made up more than 50% of the total new contracts reaching 53% of all business. Whether this is because of a nervousness about the future pushing people into the more stable although more expensive fixed rates or because there is a general feel Euribor may be going to rise or a one off is difficult to tell.

The 12 month Euribor has been rising slightly each month so whilst still in negative territory the move to fixed rates could be a reflection of this. Given loans that completed in February were agreed at least the month before we may see this trend move back the other way as sentiment is that rates will either drop or remain very stable in the next few months as Europe tries to recover financially from the COVID lockdown.

Madrid loan numbers down more than most

Madrid after a a very good year last year saw a drop in the month below the median of other regions. Numbers of new loans was down 33.1% on previous month, 29.4% on previous year.

The Balearics also had a low month down 37.6% on last month and 44.6% against last year.

Murcia is one of the few regions up over last year with an increase of 5.6%.

Because of the nature of the mortgage business in Spain the worst affects of numbers of new loans completing will be felt a couple of month after the worst of the lockdown is over due to people not being able to or wanting to apply for a loan during the months of March and April. This downturn will start to take affect for May and Junes completions and will probably not recover much until after summer.

Other factors depressing market

Other factors like the rule on currency swap brought in last year will take its toll this year with more and more lenders withdrawing from offering non resident loans to a number of residents of specific countries

This is a big concern to developers at the moment who have sold units off plan with developer loans that many of the clients will no longer have access to so we can expect to see some pressure being brought to bear on the regulator to adapt the currency rule to reflect the high level of non resident lending that happens in Spain.

Construction loans in Spain

During the time of last few weeks we have seen a significant upturn in applications for construction loans. These seem to be from people who have already bought plots some time ago and are now considering building. This may be because those who intended to build have suddenly found themselves with time to look at the project and its funding.

In general from a period when it was very difficult to obtain most Spanish Banks are now actively lending for self builds again.

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Spanish loan levels up on last year https://www.imsmortgages.com/blog/spanish-loan-levels-up-on-last-year/ https://www.imsmortgages.com/blog/spanish-loan-levels-up-on-last-year/#respond Thu, 30 Apr 2020 19:46:46 +0000 https://www.imsmortgages.com/?p=3256 Spanish loan levels for February 2020

February Spanish Mortgage figures like January do not as yet reflect the impact of the shutdown in Spain.

Februarys registered loans will reflect mainly completions that happened late December and throughout January.

In total 36,050 new mortgages in Spain were registered at land registry. This is up 16.1% on the same month of last year but down 8.3% over January 2020. It is normal for Februarys figures to be below January and in fact this was a much lower decrease than the same time last year.

Unusual increase in Spains average loan size

One anomaly in the month was a significant jump in average loan size. The average loan size rose to € 176.206 42% increase.

There is no rhyme or reason for this but from the regional figures you can see it has been caused by a steep increase in the Cataluna region. Whether a very large and it would need to be large loan completed in Cataluna that has skewed the figures or maybe a large development of quality top end houses all came to completion in the month. It would be anticipated that it is was a one off event and that next month average loan size would drop back into the 125k arena.

Capital lent due to the loan size increase was up 64.8% on last year and 40.9% on January 2020.

For the two months accumulated in terms of numbers of new loans the increase is 10.7% and for capital lent 30.4% plus.

New Spanish mortgages for Homes up sharply

Another area seeing a big increase was the level of mortgages in Spain being lent to buy a residence. Normally around the 60% level in February 69.6% of all new lending contracts was for the purpose of buying a home.

Money lent to developers to help buy development land only made up 3.6% of all new lending which is below the average 5% of last few months.

The split of fixed rate mortgage product type to variable rate contracts held steady at 62.6% variable and 37.4% fixed.

Interest rates edged up very slightly with a total average rate of 2.64% of which variable was 2.47% and fixed 3.02%.

This average rate was above Januarys figure of 2.55% and last years average rate of 2.62%.

Valencias residence mortgages increase

Regionally Valencia was one of the few regions who saw growth over Januarys figures and year to date best performers were Andalucia up 30.9% on numbers of Mortgages and 85.4% on capital lent and Cataluna 16% up on numbers so close to yearly average but up 181.7% on capital lent due to the large hike in average loan size.

30.159 loans were redeemed in the month giving a net inflow to the Spanish Banks lending books of over 5,000.

Impact of COVID 19 in Spain

Next months the figures will start to reflect the situation in Spain due to COVID 19. We should see numbers drop considerably although completions have still been happening.

As part of the Spanish Lenders response to the Virus all lenders have been instructed and are now starting to offer existing clients who meet certain parameters, so furloughed or unable to work during this period the opportunity to move their existing Spanish Loan to interest only for a period of 6 to 12 months.

Spanish Banks offer customers relief during Virus shutdown

Residents and non residents experiencing short term difficulties should contact their lender to discuss this option. With interest rates so low this option would reduce significantly the amount payable until such a time as it is possible to earn sufficient money to cover the outgoing.

Deferred capital payments will have to be made up at some point and this should be done by way of an extension to the number of months the loan is held or after the interest only period is over payments would have to increase to get the loan back on track.

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Major Spanish lenders puts focus on re-mortgages https://www.imsmortgages.com/blog/major-spanish-lenders-outs-focus-on-re-mortgages/ https://www.imsmortgages.com/blog/major-spanish-lenders-outs-focus-on-re-mortgages/#respond Thu, 23 Apr 2020 18:26:36 +0000 https://www.imsmortgages.com/?p=3247 Re-mortgages in Spain

After many years of lack of interest in looking at re-mortgages one Spanish Bank during this difficult time due to Covid 19 has decided to put some focus on the potential clients it could attract.

The lender is not offering fixed rates at this present time but variable trackers at 1.75% to 2% above Euribor.

The key benefits of what they are doing are that there is no bank arrangement fee, they will consider adding any Notary subrogation costs to existing loan and no life cover is required to be attached.

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Previous rates from post banking crisis will be high

Back in 2010 to 2015 whilst after the crisis Banks were still doing Mortgages in Spain these were at very high margins above Euribor. At one point whilst volume was small lenders were charging up to 4% above Euribor and 2.5% to 3% was pretty standard.

Fixed rates were rarely for the full term but when granted were at rates around 6%. Any borrower, however good their fiscal quality who wanted to buy during that period will have very high rates in comparison to what they could now achieve.

Why have Spanish Banks not done re-mortgages for many years

For years Spanish lenders have shied away from re-mortgages, prior to the last regulation change the process was very complex required a great deal of work on behalf of the Bank offering the new loan and very often did not end up in new business as the existing lender matched anything the new lender was offering halting the process.

Even if the client was unhappy with existing lender if the existing bank matched rate then the client had to stay with the existing lender or the new loan attracted mortgage deed tax which then negated any benefit derived.

The level of cost attached to re-mortgaging made it unlikely either the Bank or the mortgagee would benefit from the transaction.

Even in times when mortgages for purchase were slow lenders were not focussed on re-building their loan books preferring to reduce their exposure to lending rather than increasing it.

Spanish Banks want to lend

Times have changed with most lenders now having in place high targets for lending and looking to rebuild their lending books. Brexit, uncertainty for many months on the political stability in Spain and now Covid 19 and the shutdown in Spain have all impacted on lending volumes and re-mortgages are one way a lender can look to do business in what will be difficult year.

In many respects re-mortgages are good risk and it has been difficult to understand the resistance lenders in Spain have had to this type of business. Far better to have a new borrower who can show history of good payment than risk taking on a customer who can not demonstrate this.

The issue of extra funds out remains as this is linked to money laundering guidance so only extra funds for improvements will be considered, it will not be possible under normal circumstances to increase the loan level and the loan. to value is maximum is 60%.

Any borrower who borrowed 80% loan to value at the time non resident lending could be at this level will not be able to access the new facility as the Bank wants to know that at least 30% of the owners own cash went into the property originally and for any that borrowed 70% the loan will need to have been paid down to the 60% level.

Cost of moving must be taken into account

As before the cost of moving the loan must be outweighed against the benefit on the rate. The loan offering is variable so this also needs to be considered as if you have a fixed rate it will probably be fixed for the long term and whilst the 12 month Euribor is very low at present in minus territory this can of course change.

The fact that there is no arrangement fee for the lender lowers the cost considerably and means only subrogation, valuation fees any redemption fee and broker fee needs to be considered when calculating how many months it would take you to recoup costs against lower interest payments.

No life cover will make product attractive

If costly life cover is attached to the existing loan and is not required by the borrower or they could get much cheaper cover in the country of their own residency then this current extra cost could be removed and may be the key reason why it would be attractive to consider a move.

If you would like to assess whether moving your Spanish Mortgage would be right for you and understand more fully the pros and cons of doing so contact us today.

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