Year on year lending activity.
August loan completions increased in August both in numbers of and capital lent against the same month of the corresponding year.
The average value of home finance in Spain also spiked, up 5.8% to € 102.430. Average loan sizes are now up on an inter-annual accumulated basis when looking at 2013.
The total loans registered at Land Registry for the month, secured against dwellings, stood at 15,040 which is 23.8% higher than August of the previous year. Whilst the month’s figures were significantly up year on year accumulated the numbers remain 6.6% behind 2013.
Borrowing for residential properties exceed 1.500 million Euros 31% higher than last year but 5% below the total lent by this time in 2013.
Of total funds lent 43.5% were granted to dwellings with a similar amount granted for other urban property relating to commercial ventures rather than housing. A much smaller amount was lent against land and Rustica properties.
Is all the news good.
Whilst on the face of it this all seems to be good news the decrease in the number of new mortgages registered between the month of July and August was the highest of last 5 years. Numbers of new loans registered in August against numbers registered in July this year dropped by 16.9%. This may partly be due to a significantly higher level of activity in July this year.
Borrowers product preferences
There was no movement in August in terms of split of types of loans with 93.9% of all loans being taken out on a variable rate basis with only a very small handful of applicants choosing to contract a fixed rate. In Spain most mortgagees elect to take a variable tracker due to the higher redemption penalties and lack of competitiveness of fixed rate offerings when put side by side with variable margins and current Euribors.
The average rate for household finance in the month was 3.76% down some 12.4% from last year due mainly to a significant drop in the last 12 months of the 12 month Euribor.
Regional high points
Andalucía remained the region with the highest number of new loans constituted followed by Madrid and Cataluña. Madrid secured the highest level of capital as average loan size exceeded other areas. All regions except for the Balearics saw a drop in number of new loans when compared to the previous month of July but all regions except the Canaries and Rioja La saw a large increase in numbers when compared to the corresponding month of the previous year.
Redemptions versus new borrowings
The total number of home loans canceled with the Spanish Banks in August was 18,822 yet another consecutive month of net outflows. The margin however between the amount of mortgages being redeemed and new finance being taken has narrowed considerably from where we were a few months ago.
For many months and years it has not been unusual to see redemption numbers being double of that of new loans causing significant hemorrhaging of the lending book for all Banks in Spain. This outflow seems to be slowing and is necessary both for long term profitability and to help the Banks reduce the arrears as a percentage of their total book.
Replacing redeemed and defaulted loans with healthy new finance whilst not stemming the default numbers does ensure as a percentage of total borrowings the defaults start to drop.