Total mortgages completed in Spain for dwellings in January were 20,913 up 20% on the same month of the previous year.
The average loan size in Spain stood at € 105.792 an increase of 4.3% when compared to the same month of the previous year. At present there is no obvious trend that would indicate if this rise is due to prices of property stabilizing, and in some areas increasing, or a shift in the maximum loan to values that either applicants or Banks are looking at as confidence in the market continues to grow.
The level of capital lent exceeded 2.212 million in the month, and was up by 32.1% on the level of capital lent in December, and up 25.2% when compared to the January of 2014. In terms of number of new loans constituted when compared with the previous month total loans were up 31%.
Over 56% of all new lending in Spain was lent for the purchase of homes. There is little to be read into this statistic as it is normal that more than 55% of all credit lent is for this purpose. The fact that the split of secured credit remains relatively static, despite the increases both year on year and month on month, indicates that the general feeling that recovery is on its way is shared by buyers of homes, businesses and Banks alike.
5 Year trend
Whilst the overall increases were very significant, when analyzing the increases between the December and the January as a 5 year trend, at an increase of 32.1% this was in fact lower than the last 2 years. In 2013 mortgage capital in Spain rose by 47.1% January over December, and in 2014 this was 41.2%. When analyzed by numbers of new loans completed the percentages were 46.3% in 2013 and 40.8% in 2014. This is however against a backdrop of significantly lower overall numbers.
Variable versus Fixed rates
94% of all loans completed as normal on a variable rate with only 6% of all applicants electing to take a fixed rate. Historically most borrowers have taken variable rates due to a lack of competitive fixed rates being offered by the Banks, and due to high early redemption penalties linked to them. This is beginning to change with Banks offering reasonable long term rates the best of which for non residents, over 25 years, is 3.9% and lower early repayment penalties from as high as 4.5% to a more reasonable 1.5%.
Banco Sabadell has recently launched a new range of fixed rates products and in response to competition from lenders like UCI has reduced early repayment penalties significantly.
This change in the market will interesting to watch to see if overall access to good value and competitive long term fixed rates start to shift the split of lending between variable and fixed.
The average interest rate for completions in January, where it related to dwellings, was 3.29% and the average term was 21 years. At a rate of 3.29% the average interest charged has dropped by 20.6% when compared to the same month of a year ago. Some of this is due to a continuing fall in the 12 month Euribor but also reflects the reductions in margins now being charged as competition between banks to secure new lending hots up.
The 12 month Euribor continues and will remain the key index to which loans in Spain are linked.
Lending by Region
By region the Canaries showed the highest level of lending growth being up 99% on the same month of the previous year and 93% up on December’s completions. Other highlights for regions where International buyers focus their interest were, the Balearics up 35.1% year on year, Cataluña up 72.7%, Andalucía up 25.1%, Valencia up 26.25 and Murcia up 29.5%.
Only the region of Cantabria showed a decrease against January of last year, and Madrid previous acceleration slowed to an increase of 7.6%.
Andalucía, Cataluña and Madrid remained the regions with the highest absolute number of new loans granted all reaching over 3,000 in terms of numbers of. Madrid just pipped Andalucía in terms of capital lent with over 64 million and Andalucía close behind at over 63 million.
Ouflows and new objectives
Despite a far more aggressive approach to lending with all Banks looking to increase the number of loans and capital lent in 2015, net outflows exceeded new loans granted. This remains the big challenge for all Spanish Banks reversing the trend of reducing mortgage books to a situation where their balance of credits starts to increase.
Products are changing regularly now, new flexibility and improved service levels are being experienced, and many Banks like Caixa who launched Hola Bank this week, specifically aimed at International borrowers and clients, are proving non residents are no longer the shunned and unwanted that they were between 2007 and 2013.