Mortgage cancellations lower than new completions in September
For the first month in well over 6 years the number of home loans newly constituted in Spain outstripped the amount of loans cancelled.
Data released this month, taken from land registry by the statistical office for September, showed that more than net 2,814 new Spanish loans were added to the banks books in September.
This trend, should it continue, will be a welcome relief to the Spanish Banks who have had net loan outflows every month since the banking crisis began.
Shrinking mortgage books
Early on in the housing and banking crisis Spanish Banks were keen to reduce their loan exposure and to shrink their overall books. Many Banks during the years of 2007 to 2012 removed themselves from actively pursuing the lending market by way of increased and tightened risk criteria, and increased pricing. A number of Banks removed themselves entirely from nonresident lending mortgages in Spain including Barclays and Lloyds who subsequently sold their divisions, and a number of other Banks severely restricted who they would lend to outside of Spanish Nationals.
Since 2012 most Spanish Banks have actively been seeking new lending, but have found that a bit like turning round a large ocean liner, suddenly turning back on the credit tap was no guarantee of actually lending any money. Mortgages in Spain newly constituted had been falling below the levels of redemptions made each month for a number of years.
New loan funding is required by all Banks both to keep defaults as a percentage of the overall book moving downwards, and to protect future earnings from both interest earned and the auxiliary products the banks obtain when a new mortgage in Spain is taken out.
In September total new loans reached 23,828 some 20.2% higher than the same month of the previous year. Average loan sizes for dwellings increased to 109.926 an increase of 3.4% over 2014 levels.
Annually up the end of September the number of loans has increased by 21.6% over the same period in 2014, capital lent is up 25.4% and the average loan size has increased by 3.2%.
Of all credit into the market 54.7% was for the purchase of homes.
Whilst the monthly increase August to September was up 23.6% this is not as high as the increase between August 2014 to September 2014 where loans rose by 29.4% but it is the second highest intermonth increase over the last 5 years.
Interest rates and product types
Dropping back slightly from August the percentage of loans closed on a fixed rate basis in September was 9.7% but this percentage remains a few points higher than has traditionally been the case in Spain.
Average interest rate for home loans was 3.34% which is 7.1% lower than 12 month ago. This is partly due to a continuing drop in Euribor rates and a reduction in Banks margins.
12 month Euribor was the index used in over 94% of all new contracts.
Madrid community and the Balearics are best performers
Regionally, on a percentage basis rather than true volume, the Balearics continues to shine. Annually the number of new loans in the Balearics has increased by 74% when compared to 2014.
Other regions well above last year include Cataluña, Valencia and Madrid. Madrid in terms of numbers of loans beat Andalucía completing on 4,949 in comparison to Andalucía at 4,330. Like the trend of new loans exceeding cancellations it is many years since Madrid community completed on a higher volume than Andalucía.
Andalucía and Murcia of the region’s most popular with international buyers purchasing homes in Spain have the lowest percentage increases at 13.8% annually and 6.1% respectively.