Lower loan sizes but numbers of Spanish mortgages increases
Loan data released last week from the INE in Spain for May showed a significant dip in average loan sizes.
At the moment each month the lending figures are jumping around all over the place and whilst there is still a trend of increased lending annually the normal seasonal trends do not see m to be applying.
Some of this may be because of when Easter fell and the fact it was early April perhaps delaying completions that would normally be registered for Mays figures but it is difficult to predict at present exactly what is happening in the market place.
Unusual activity levels in 2018
The timescale from making an offer on a property to completion seems on new business we are submitting to have extended quite considerably.
Under normal market conditions in Spain where chains are unusual the process normally takes 6 to 8 weeks in total. What appears to be happening is that from point of approval and offer completions are now 2 to 3 months down the line which means loans written in April may not in fact complete until July August.
Some of this could be driven by more and more mortgage applicants wanting to get a pre-approval in place before committing to a property and that this mode of buying has started to happen in the indigenous Spanish market which was not the case some years ago.
The move by Spanish Banks away from allowing risk assessment at local level and branch managers having mandates to nearly all loans being approved at head office level possibly is the main driver of this. No longer is it enough for your parents and you to be well known by the local bank to ensure a loan is offered.
Whilst technically having loan facilities pre-approved should speed up the overall process it would seem that across all areas of the home buying process buyers are slowing down the speed at which they buy and vendors also.
In May the average loan size fell from Aprils € 123.3k to 117k. Against May of the previous year however the average loan size was up from 113.9k.
The number of new contracts was 31.166 an increase on April of 8.5%, on April of 2017 an increase of 7.3% and annually year to date the number of new Mortgages in Spain are up 10.7%.
The capital lent was also increased in the Month both month on month and year on year but over April due to the average loan size drop this was just an increase of 3%. Overall year on year the level of capital lent is up 16.7%.
The monthly variation was more in line with yearly trends with May last year seeing large increases over May.
Interest rates remained low
Fixed rate contracts took more market share
The number of new loans secured on a fixed rate basis rose to 40.6% of all new residential lending up 6.3% on last year.
The average fixed rate on the average term of 23 years was 3.04% in May. The average variable rate was 2.38% down 14.5% but this is only because the Euribor is at 0%.
Canary Islands is star performer in May
Regionally the Canary Islands had a massive increase in all areas of lending in May. Over April the figures were up 85.9% and over May of the previous year up 70.9%. Year to date they are one of the top performing regions but sales in the Canary Islands tend to be earlier in the year with it tailing off over the summer months.
Barcelona or Cataluna which seemed to come through the crisis of last year unscathed is struggling so far this year being only one of two regions down annually to date for capital lent and numbers of Spanish loans.
Murcia who after a very bad year in 2017 has seen regular upward trend in 2018 also blipped in May down on the Month of April for both capital lent and numbers of new loan contracts. Valencia on the other hand had a much better month.
After appearing that finally after many years of net outflows the lenders in Spain could expect to see net growth on their loan books for the second month running loans cancelled or redeemed were higher than new loans completed.
Net loan book outlfows
New loans totaled 31.166 and cancelled loans totaled 34.249.
Based on pipeline business I think this is likely to change as we go through the second half of the year.