Blog – Spanish Mortgages https://www.imsmortgages.com Personal and Professional information service Thu, 06 Aug 2020 17:56:19 +0000 en-US hourly 1 https://wordpress.org/?v=5.4.2 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 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 loan 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 should show up in next months figures.

New loans drop significantly

The number of new loans constituted 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 loans was down 14.6% on the same month of last year and down 26.8% on the previous month.

The average loan size 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 loan contracts 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 loans 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.r

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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Spanish loans the calm before the Covid19 storm https://www.imsmortgages.com/blog/spanish-loans-the-calm-before-the-covid19-storm/ https://www.imsmortgages.com/blog/spanish-loans-the-calm-before-the-covid19-storm/#respond Tue, 31 Mar 2020 17:31:54 +0000 https://www.imsmortgages.com/?p=3211 Mortgage data Spain January 2020

Amidst everything that is going on at present the INE in Spain issued mortgage data in Spain on the 26th.

The numbers relate to Januarys Spanish loans registered at land registry so are likely to reflect signings from December well before anyone dreamed in three months Spain would be on a lockdown.

All things being equal and had COVID 19 not got in the way it looked from Januarys figures like 2020 was off to a good start.

The figures will as the year progresses become meaningless with certainly by the time March figures are issued the number of loans in Spain being registered hitting the floor.

Most badly hit initially will be the Easter which is traditionally a time when the buying and selling market is very active.

Average loan size down against increased volume

The average loan size fell heavily in Januarys figures, why this is the case is difficult to tell in normal circumstances we may have expected this bounce to back.

Loan size for Januarys Mortgages in Spain was € 114.7k, the previous month was € 122.1k and January 2019 € 120.8k. The downward trend was minus 6.1% and 5% respectively.

The total number of loans registered was 39.314 up some 29.8% on Decembers figures and 22% up on same month of last year. Capital lent was 4.508.977 only 6.1% over December  and only 0.8% over January of last year due to the drop in average loan size.

It has to be said however that last January was up 74.98% over the previous month so actual increases January over December was the lowest for 4 years.

62.9% of all new credit into the markets was lent for the purpose of buying a home much in line with normal averages.

Interest rates edged up but this won’t continue

Intertest rate averages over a 22 year loan term were 2.55% slightly up on December 2019 and slightly down on January 2019.

Fixed rates as a mortgage product type and as a percentage of all transactions was 41.8% which since its rise in popularity five years ago has stayed at this sort of level for last 12 months. With variable rates being very low and the 12 month Euribor stuck in negative territory many have decided the benefit of long term stability versus todays rate is not at present appealing.

Given what is happening currently fixed rate transactions may diminish slightly as it is difficult to see rates rising for quite sometime.

Madrid already weakened in January

Madrid after a very good 2019 showed signs of weakening even before the virus hit numbers of new loans were up by 20.2% over Decembers figures but down 22.7% over January of last year. In total 8,160 new Spanish loans were registered in the province. This will probably drop to near zero as figures are released in a couple of months.

Capital lent in Madrid dropped by 10.2% on last year.

Andalucia started the year well 41.1% up on December and 17.32% on last year and Cataluna, Valencia and the Balearics all saw increases.

Murcia against very small activity was up on last year but the numbers remain tiny at 984 new loans in comparison to the thousands back before the financial crash.

Much unknown for rest year

In total 29.113 loans were cancelled giving the Spanish Banks an uplift of over 10k new loans to their mortgage book.

Given there is going to be little house sale activity for at least the next three months the lenders may not see large outflows. What they will see however is late payments creeping up as the population struggles to cope with lack of work and income.

Had COVID19 not happened Januarys figures suggest 2020 would have been relatively buoyant what happens now who knows but it is likely the housing market and the loan market will see worse figures than during the financial crisis which will take some doing but is possibly inevitable.

How quickly it bounces back may very much depend not just on the internal Spanish market but the affect on savings and income of the citizens of the many countries who buy second homes in Spain.

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Certain non euro earners struggle to get a loan in Spain https://www.imsmortgages.com/blog/certain-non-euro-earners-struggle-to-get-a-loan-in-spain/ https://www.imsmortgages.com/blog/certain-non-euro-earners-struggle-to-get-a-loan-in-spain/#respond Thu, 12 Mar 2020 13:03:45 +0000 https://www.imsmortgages.com/?p=3204 Number of Spanish lenders lending to non residents decreases

 

The last few weeks have seen more Spanish Lenders remove fixed rates as an option for a mortgage in Spain for applications where the applicant earns their incomes in a different currency to Euros.

Whilst most lenders have stipulated currencies by which they will still lend by way of a variable rate an increasing number have decided to withdraw from lending to certain applicants earning their incomes in certain currencies.

Who is this affecting

The situation has got increasingly worse as the legal teams in the Banks have absorbed the implications of the new currency rules.

Most highly traded currencies like the US dollar and Sterling all lenders are dealing with on a variable rate basis but for the far east and middle east currencies like the Dirham and those working and living in the UAE, it has become yet more difficult again to find a solution.

Interestingly due to “ internal politics” one lender UCI will no longer lend to individuals who earn their income in US dollars

With many expats from all over the world working in places like Singapore, Hong Kong and the UAE this is causing some real disruption to the market.

Whilst other deemed stable currencies like the Canadian Dollar, Swiss Franc, Danish Krona are generally included in list of will accept currencies currencies like the Dirham, and Hong Kong Dollar are not.

Spanish developers struggling

A Number of developers who pre-sold units off plan on basis the buyer could subrogate ( take over) a loan they had secured at build stage and have sold the unit off the back of a mortgage comes with it at completion are finding themselves in a situation where  not only can they no longer offer this option for the closing funds but the buyer is independently finding difficult to source any Spanish Bank that will lend.

This has a double affect for the developer. The client cannot make the final payments but the buyer is also very upset they have bought based on a guaranteed mortgage in Spain which is no longer forthcoming.

Expats from the UAE who are prolific buyers in Spain have been hardest hit.

Is it still possible to obtain a loan

It is still not true that all expat buyers from the UAE cannot get loans but if as an applicant you have approached three banks and they have all told you no you may believe that this is the case.

There remains at least two lenders that will lend but you need expert advice as to who these are and what options you will have.

Behind the scenes there is pressure being applied trying to get the Spanish Government to re-word the mortgage regulation rather than it state anyone earning their money outside the euro will have the right should the currency exchange rate slip by more than 20% to request the loan gets transferred into the currency by which they earn.

Each lender has as time has gone on become more and more nervous about the implications in future and the cost of changing and handling what in affect would be multi currency loans.

This is not helpful for the lenders but neither in most instances would be good advice for the client as previous multi currency loan options have shown.

Why has the issue happened

If you transfer the currency on your loan when exchange rates fall the capital owed will increase. Yes you wont have the monthly cost of moving your income to the euro but you will technically owe more. Then as exchange rates fluctuate again any benefit of swapping will diminish or be wiped out and you may wish to change back again.

Each time you do this your Capital will increase temporarily and the Spanish Banks are not equipped nor desire to keep changing the currency. Most of their systems do not allow for it and so each transaction would have to be manual on top of the fact the Bank has to buy in funds at a certain price to fund the lending.

For many Banks the potential future cost, workload and risk of fines if they don’t adhere to the policy has meant they would rather lose the business than offer loans.

A resolution is needed

The Spanish housing market relies quite heavily on non resident buyers so any restrictions to borrowing in Spain can have a severe impact on the economy and the regulation in all reality helps no-one.

It has to be hoped that before all Spanish lender offering non resident mortgages in Spain decide the cost of offering the loan outweighs the benefit of doing so that something changes and a rather pointless but in fact dangerous piece of legislation gets changed.

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Spanish home loans 2019 year to date https://www.imsmortgages.com/blog/spanish-home-loans-2019-year-to-date/ https://www.imsmortgages.com/blog/spanish-home-loans-2019-year-to-date/#respond Fri, 28 Feb 2020 18:40:05 +0000 https://www.imsmortgages.com/?p=3186 Loan levels in Spain

Decembers  mortgage data was released this week along with the year to date for 2019

In December Mortgages in Spain average loan size fell to 122.1% down 4.2% over Dec 2018 and down 5.9% against the previous month.

The number of loans in Spain reached 30.285 up 3.9% against November and 43% over December 2018.

Normally December is much lower than November so the numbers are a reflection of Banks catching up with completions that have been delayed due to new regulation.

Capital lent to buy a holiday home or main residence was down 2.2% over the month of November due to the drop in average loan size but up 37.1% on the same month of last year.

Capital lent for home loans higher percentage in December

64.5% of all new loan capital flowing into the market was lent for the purpose of residential purchases.

Interest rates were 2.53% as an average variable rates continue to be below those of the previous year down some 3.5% on last year. Fixed rates however have edged up slightly at 3.06% up 2.6% on last year.

A total of 56% of all new loans completed on a variable basis with 44% completing on a fixed rate. We may see fixed rate completions start to drop as lenders remove the facility for anyone not earning their incomes in euros.

Over the full year 2019 saw the lowest upturn across all areas of numbers of, average loan size and capital lent for over 5 years.

This may be partly because prices have stabilised in the year but is also an impact of new regulation, general economic concerns in Spain and across the world and of course Brexit.

In total for 2019 357.720 new loans were granted up 2.7% on 2018, average loan size was up 0.6% up and capital lent 3.3% up.

Since 2015 the average loan size has grown from 106.7k to 125k for 2019.

Madrid best performer for the year

Madrid now has the highest level of new loans for the year with 69.616 granted. Andalucia which was the biggest market in other years completed on 67.845. Cataluna remains in third place in terms of the numbers.

Only the Balearics against a good year last year and small numbers saw a fall across all areas of lending in 2019.

Spanish Banks have a net inflow of lending first year in many years

One positive from the month was that net outflows of balances of the Spanish Banks lending books were not the case for December and more than 4k more loans were added to the books than redeemed.

For the first year since the banking crisis the lenders in Spain added to their mortgage book with 339.194 cancellations and 357.720 new loans added.

Construction loan enquiries increase

The market remains a little stagnant at present but we are seeing a considerable upturn in borrowers looking for self build/ construction loans in Spain.

Many have already bought the land and may have delayed construction until they felt the market was progressing others see it as a way of adding more than value than buying a resale, but the upturn of this type of application is considerable.

For many due to the fact you must own the land outright and have a project in place before applying for a loan the risk is too great to proceed but for those where land is already owned or those who know they have other means of completing project if finally a Spanish Mortgage is not possible the market is a little more flexible again now with most lenders considering applications

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Bank Lending in Spain https://www.imsmortgages.com/blog/bank-lending-in-spain/ https://www.imsmortgages.com/blog/bank-lending-in-spain/#respond Wed, 05 Feb 2020 16:04:19 +0000 https://www.imsmortgages.com/?p=3154 Bank of Spain quarterly survey

The Bank of Spain has issued its quarterly report on Bank lending for Q4 2109.

The data, some of which is open to question, is compiled not from statistics but from a questionnaire sent to participating lenders.

Given the lenders may wish to politically skew some of their answers it is difficult to ascertain what is factual versus heresay.

What is factual is that demand for mortgages in Spain to buy a residential property fell during the quarter.

The demand for loans in Spain showed the biggest decline since 2013.

Rationale for drop in demand

Spanish lenders have told the Bank of Spain this is not due to regulatory and supervision changes and to do so would have been admitting to their lack of preparation for the changes implemented in June of 2019.

This said overall demand does seem to have stalled and can be put down to a number of factors including a decrease in non resident applications due to Brexit and concerns over the economic stability and continuing growth of Spain.

The Spanish Banks anticipate demand will continue to decline for the foreseeable future.

Whilst this may well be the case we have seen an upturn in new enquiries from UK residents since the UK election.

Whilst enquiries are up quality of these enquiries is down.

Quality of Spanish loan applications

Many borrowers are looking for equity release which is not something that can be gained as a non resident of Spain unless the funds are to be for improvements or to partially assist in buying another property or loan to values required are too high and or debt to income ratios too high.

Adjustments last year were made by the lenders making it much more difficult for a non resident to gain the full 70% loan to value unless they earn their incomes in Euros and for UK applicants many lenders have tightened debt to income ratios reducing them from the normal 35% to 30% or less.

The rationale for this is a concern over what will happen to the pound as any drop in the currency increases the actual cost for the borrower plus a concern as to what overall will happen to the UK economy once it is outside of Europe without knowledge of how future trade deals, or not, will look and its subsequent impact on UK growth, employment and company owners.

Non of this is going to change until the situation has settled down, the picture is clear and the UK has demonstrated that at worst Brexit has had a neutral impact. It may therefore be some years before lenders go back to offering 70% as standard.

Loan to values under pressure

A handful of lenders remain open to 70% loan to value but very much on a case by case basis and the application needs to be vanilla in terms of the borrowers overall exposure to borrowings so capital borrowed and level of outgoings versus net incomes.

For non residents outside the UK the changes to regulation for non euro earning applicants remains the same as it did a few months ago with many lenders withdrawing fixed rates and or no longer offering any facilities to certain categories of borrowers.

Given the implementation of alterations to risk criterias have not been the same across the board some of this may change as 2020 progresses and due to decreasing demand lenders could re-assess their approach they have taken on basis not all lenders have taken such drastic action.

Interest rates

Interest rates remain low and where long term fixes can be gained continue to look very good value for money.

The 12 month Euribor has seen very marginal increases for the last 4 months but still remain on negative territory and the Banks report access to funds has remained stable and in many instances has not been required due to a drop in demand.

Brokers in Spain provide access to total market

The market remains challenging with a continuing decrease of access to independent brokers who can access the whole market for applicants due to an inability to meet new supervisory requirements and the pot luck of a mortgage application in terms of a direct application depending on the risk criteria of that particular lender.

Many applicants have been rejected when going direct to Banks and led to believe that this would be the case with all lenders. Knowledge of what can and cant be done with each lender and tailoring an application on this basis is now a big part of the role a broker would play and is even more crucial than just looking at rate.

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