Latest news for mortgages in Spain issued this month
Loan levels in Spain dropped in June both against the previous month and the same month of the previous year.
The number of new Spanish mortgages registered dropped by 2.5% against last year with a total of 29.900 the average loan size dropped by 3.7% and the total level of capital lent for the purpose of buying a home dropped by 6.1%.
Against the month of May the decreases were more pronounced with numbers of loans being down 14.3%, average ,loan size down 3.4% and total capital lent down 17.2%
Despite the lax lustre performance total numbers of new home credits in Spain, average loan size and capital lent remains up for the year to date. It was however the highest drop month over month in June for over 5 years.
Lending under pressure in Spain
The last couple of months have shown that loan levels in Spain are under pressure. A number of factors have played a part in the cause of this.
Political uncertainly in Spain has certainly played a part. Madrid region is one of the worst performing regions this year and clear indication the home market is under pressure.
Most coastal regions favoured by the non resident purchasers are showing decreases or flat growth in latter part of year apart from Murcia and Valencia and Andalucia these being the only three regions still ahead annually over last year.
Brexit is having an affect both in terms of UK buyers holding off on buying decisions and other nationalities doing so in hope there will be an influx of cheap property after Brexit as retired expats sell up due to the drop in sterling and health care issues.
The Balearics was down 30.4% against May, Canaries down 19.15 and Cataluna down 20%. The lowest decrease was Murcia only being down 2.6%.
New mortgage regulation impacts on completions
July and August are unlikely to fair any better due to continuing concerns over Brexit but also due to new Spanish loan regulation which was implemented in June 2019 and prevented, due to legal changes, some mortgages in Spain from completing in the months of June and July.
The introduction of new cooling off periods, new document requirements which the Banks in Spain were not geared up to supply and the need for all mortgagees to attend Notary a minimum of 24 hours before completion meant many completions had to be postponed to a later date.
It is anticipated that the rest of 2019 will at best be flat at present it is difficult to see the last half of the year improving.
Whilst at present most lenders have not significantly changed their offering to brits it is becoming increasingly difficult to get the full 70% approved and some lenders have tightened their debt to income ratios from 35% down to as low as 25%.
Other changes under the new regulation have also had and continue to have an impact on how and under what circumstances an applicant for a mortgage in Spain can apply for a fixed rate. New laws on allowing currency switch at a later date, implemented to assist those taking a currency loan, but so badly written it affects all loans have meant many lenders will now only provide variable rates to those who do not earn their incomes in Euros.
Fixed rate access is reduced
After years of a shift to fixed rates mortgage product type and the stability this gives borrowers and lenders the new regulation is pushing applicants back to variable rates. In a market of low rates and Euribors at a minus level this is not an issue but could provide future instability in the Spanish mortgage market as rates rise in the longer term.
Instead of increasing choice, and protection for the consumer this particular part of the legislation is having the opposite affect.
Of all new credit flowing into the market 62.9% went for the purchase of a dwelling.
Interest rate averages continued to drop against last year.
The average term for a new loan is 24 years. Variable rates are down 6.1% on last year figures and were 2.29% in June. Fixed rates were down 1.3% and an average rate of 3.01%.
The 12 month Euribor has dropped marginally for the last 2 months against a back drop of the markets believing the EU base rate will not increase in the near future. As this continues interest rates will remain low and stable.
Next few months
Maybe also due to the Political situation in Spain along with concerns over a global and European slowdown cancellation levels were 27.624 so more new loans were constituted than those redeemed. Homeowners may be delaying decisions to upgrade or move until things settle down and it is likely as this continues that the lenders in Spain will start to see net outflows again for the rest of this year.