Residential loan activity in Spain for April
April saw a bounce back in terms of mortgage in Spain levels in April for both levels above the previous month of March and against April of 2017.
The average loan size rose by 9.1% over March and was up significantly from April of last year. Average loan size in April 2017 was € 114.5k and in April this year reached € 123.3k.
Capital lent rose by 12.2% over last month and was up a whopping 46.5% over the same month of last year. The number of new loans registered at land registry was up 9% on last month and 34.2% over April of 2017 and reached 28,724 new contracts.
The accumulated Annual increase over 2017 which had suffered a little after a very good start in January rose considerably up 11.6% for the year so far for numbers of new loans, 18.6% higher in terms of capital lent and average loan size is up 6.2%.
Housing loans perform well
64.7% of all new credit flowing into the market was designated for the purpose of buying a home. This is at normal percentage levels after falling back a few months ago to less than 60%.
Month over month it is normal for the trend between March and April to be a decrease last year the levels between March to April in terms of numbers of loans dropped by 23% where as month over month this year they are up 9%.
This may have been affected a little by an early Easter break with more loans being registered in April and less last year because of the holiday period falling close to mid April or could be a sign that property purchases are continuing to move forward as the economy in Spain regains stability despite the Politicians best endeavors to upset this.
Rates remain low
Interest rates continued to nudge down all be it slowly.
The average rate at which loans were granted was 2.67% in April. This is the combined average of variable and fixed rates. The average level was down 16.7% on April last year. The average term granted was 24 years.
Fixed rates as a mortgage product type made up nearly 40% of all new transactions the highest percentage they have ever been and the average fixed rate as 3.15% down 6.1% on last year.
The lower average interest rate is a little surprising as most banks have been increasing rates slightly but this may not knock on as an affect until completions in may and June.
Spanish lenders feel profit margin pressures
It has been of concern to the Spanish Lenders that their desire to add new loans is putting significant pressure on margins and we have seen a small but definitive shift back to margin management as well as volume.
After the first quarter of 2018 the margin levels caused the lenders some concerns as is often the case in a competitive market where things are recovering and everyone is looking at their market share.
The Spanish Banks will need to keep a close eye on profitability as well as volume after mistakes made from previous years.
Coastal areas fall behind major cities
Traditional non resident areas were a mixed bag in terms of loan data. Coastal areas which had helped prop up loan levels over the last 12 months fell back against major cities .
Andalucia fell back in term of volume against Madrid which is very unusual and Cataluna saw big increases after being in doldrums for a few months.
The Balearics had a better month against very small volume the Canary Islands not so.
Murcia is seeing much more activity this year and prices are very keen in the region due to a massive oversupply of property. Buyers seem to be coming back to the region taking advantage of what you can buy for your money and in general the lenders are more inclined now to lend I the region although it is still on the no go list for UCI.
After a couple of months of net inflows prior to March despite the much higher activity levels in April the Banks experienced a second month of net outflows with over 30,000 loans being redeemed against 28,000 new contracts
Service standards may slip in next few months
Lenders and applicants making a mortgage application face some challenges in the next few weeks as the holiday season hits at the same time as branch staff must undertake the exams from the new banking regulation in Spain and across Europe.
The level of studying and exams is in the region of 80 hours and puttinga starin on the branch network and bank staff. It is difficult to see that this level of down time or after hour work will not have some affect on service standards and therefore a knock on affect on completions as the year progresses.