Home loan levels in Spain for 2020

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2020 Spanish mortgages

In the last few days the INE office in Spain issued the Spanish mortgage results for December and total year.

As would be expected the year ended up down on 2019 but perhaps not as drastically so as one might have thought.

The first 2 months of 2021 have been slow due to a further shut down but activity levels are rising as people anticipate an opening up in second quarter of the year.

December figures

In December the number of new Mortgages in Spain reached 26.128. This was a drop on the previous month of 9.1% and a drop of 14.8% against the same month of 2019.

Capital lent as credit for buying a Home in Spain reached 3.544€ down 9.08% on November and 7% against December of last year.

Average loan sizes dropped slightly from November reported at € 135.658 but remained up over December 2019 by 9.2%.

Home loans as a percentage of all new credit remains high

Like November a disproportionate level of lending in Spain was granted for the purpose of buying a home. In normal circumstances home loans make up around 60% of all new credit but in December this was 69%.

Lending against assets for Commercial purposes is down as is lending for land and development.

Stability in interest rates remain

Interest rates remain very stable.

An average 25 year loan costs 2.47% made up of an average variable rate of 2.21% and an average full term fixed rate over 25 years coming in at 2.79%.

In terms of mortgage types, variable rates made up 50.6% of all new Spanish home loan contracts with fixed rates forming 49.4%.

The ECB base rate remains at 0% and the 12 month mortgage revision rate is still slightly in negative territory.

Non resident hot spots most heavily affected

The affect of lockdowns and Covid have been felt in 2020 across most regions in Spain but in December there was a marked fall in lending in the Canary Islands down 56.5% on last year and the Balearics down 17.5%.

Both markets are relatively small with lower resident populations than mainland Spain and the affect of lack of non resident buyers and borrowers is therefore felt more heavily.

2020 data for full year

In 2020 for the total year numbers of Spanish mortgages and Capital lent was down on 2019 but this was mainly offset but a much higher average loan size.

The total number of new loans for the year was 333.721 which was minus 7.6% on 2019 with 2019 only increasing 3.7% over 2018.

The Capital lent was minus 0.8% over 2019 which was up 4.8% over 2019 and the average loan size was 7.4% over 2019 which in turn had been up 1.1% over 2018.

The number of new loans exceeded still 2016 levels but was slightly less than 2018 levels when 348.300 new loans were constituted.

For the Spanish Banks due to a reduction in the number of loans being redeemed or cancelled 2020 actually showed a net increase to their mortgage books.

This will therefore mean despite the difficulties of the year net earnings from interest and linked products should have increased.

2021 underwriting challenges for Spanish Banks

Going forward underwriting has become difficult for lenders. There are many differences between Banks as to how they view an application in Spain from someone in a steady job who has been furloughed and self employed who have government support.

Certain applications from heavily affected industries like the travel industry are finding it hard to get through the application process even if previous years show fundamental fiscal strength.

No-one is sure of the long term affect of the situation on business, how long it will take to recover or indeed if jobs will remain once furloughing stops.

Spanish Banks do not want to reject good applications from people with short term problems but they themselves are also unsure of what damage to the economy shut downs will have or for how much longer regular shut downs will be needed.

Getting a Mortgage in Spain approved early on in buying process is essential

The advice would be before considering buying in Spain make a mortgage application and have the loan underwritten before making any commitments as this level of uncertainty will almost certainly be the case throughout 2021.

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