Spanish lending news data for March 2014

Published today was the reular monthly mortgage data for Spain.

What were the key points

For the first time in many months we finally saw a small increase in both the numbers of mortgages granted in Spain and the capital lent.

The largest increase was however in the lending to small and medium sized business as the number of Spanish loans granted for dwellings showed a much smaller percentage increase than the overall lending picture.

Why is this

Since the beginning of the year Spanish Banks have been in a price war offering lower rates to attract back business loans and get credit flowing into the economy and this now seems to be filtering through into the numbers. 
ators for total lending

Residential loans in Spain

Whilst loans to dwellings did increase in the month it was a much slower rate than the indicators for total lending. Average loan size showed a year on year increase but was static in comparision to February and numbers were up slightly year on year for the month. Overall for the year of 2014 there has been a drop of 24.2% for the first 3 months of the year in comparision to 2013 but this should change as we go through the year.

The biggest challenge for Spanish Banks

The biggest challenge for Spanish Banks is to halt the ongoing net outflow of mortgages. A continuing outflow of loans will affect long term earnings and for yet another month the amount of mortgages redeemed outstripped new loans consituted by a huge amount.

Read the full article : Mortgage news Spanish lending indicators

Are Spanish Mortgages more expensive for Foreigners

A recent article in the Telegraph about Retirees coming back to Spain to snap up cut price property also covered a number of issues surrounding Spanish Mortgages.

The suggestion was that non residents buying in Spain who take a mortgage can expect to pay up to double the rate a Spanish resident would pay.

Is this true

It is only true in the case where the resident is buying their main home. For a second home or for investment a Spanish resident, as in most countries, can expect pay much higher rates when contracting a loan.

For Foreign buyers who are not working in Spain and in the tax system the property in Spain is treated not as a main residence so rates are higher. This is the case even if the purchase is to be the main home. To achieve lower rates the buyer must first put themselves into the tax system and be a full Spanish resident.

For non nationals buying in the UK, where mortgages are available, which is few and far between, rates are higher to reflect the extra deemed risk. The same is true for Spanish Banks who lend freely but see non residents buying a holiday home as a higher risk than a resident who is buying a home to live in.

Are non resident mortgage rates double resident rates

With the current improvements we have seen over the last few weeks the average rate residents will pay is not half of what a foreigner will pay. Yes the headlines talk of 1.25% above Euribor but to achieve this rate the Spanish applicant will have to have a low loan to value, a private pension with the Bank along with payment protection, life cover and buildings and contents insurance, and have their nomina paid into the account each month.

Best rates for a non resident currently is 2% above Euribor with life cover, contents insurance and a Bank account as compulsory.

Should I contract a Spanish Mortgage or borrow at home

There is no one right solution for everybody. For some people buying in Spain releasing funds secured against a UK home will be the best solution and for others a Spanish Mortgage may provide a better route. Taking professional and experienced advice from someone who understands both markets and can outline the pors and cons of each is probably the best first step in making the right desicion for your circumstances. 

Read the full article : Foreigners pay higher rates

 

Mortgage News Spain Barclays to leave Spain

Amongst a number of cuts announced to day Barclays group have confirmed they will be leaving Spain.

Why are they withdrawing

Like most Spanish Banks Barclays have suffered in the last few years from higher provisioning requirements, falling incomes and increasing defaults.

As a known UK brand Barclays have one of the largest non resident mortgage books in Spain. Failure during the peak years to effectively manage risk have compounded the problems the Spanish arm has.

What were the risk assessment failures

Barclays were one of the few Banks to offer 80% loan to value during the peak years and linked this solely to valuation in a rising price market. This meant often they were actually lending 100% or more. The inexperienced members of the risk teams and the Branches also understood little about how to assess or check the credibilty of UK style paperowrk when assessing an application through the mortgage process.

This obvious lack of experience or knowledge made them a prime target for fraudulent applications and they were hit hard during the period of high volumes.

What other factors have had an impact

Barclays swung from offering the lowest possible rates and with lax criterias to closing the doors completley for a period of time to new applications, to opening them again but with very tight criteria. Aimed at attracting high net worth individuals their most recent offering failed to recognise that the type of client they wanted had complex financial situations and that to expect every client to fit tick boxes was never going to work.

Read the full article: Barclays withdraw from Spain

Spanish Banks quarterly profit reports

Last week saw all the Spanish banks report on their performance for the first quarter of 2014.

Apart from BBVA  the second largest Bank in Spain by capitalisation all other Banks announced a general improvement to both overall profitibilty and a reduction in the level of Spanish Mortgages in default as a percentage of the book.


Bankinter whilst reporting slightly lower profits than market predictions had one of the best increases in profits. Bankinter has a much lower default percentage than most of the other big players at 5.2% when the average across all lenders is above 13%.

Bankia the Government owned banking group also showed a quarter on quarter and a year on year improvement. Bankia more than any other Bank in Spain has benefited from passing its bad assets to SAREB who was set up to help Banks remove their vast property portfolios from their own balance sheets.

Are the improvements having an effect on Spanish Mortgages

In the resident market there is a steady but sure uptrun in the mortgage market. The improvements include a price war for attracting commercial lending along with a reduction in rates for residential loans particularily at the lower loan to value level.

For non Residents there has been little movement on terms and conditions but we are starting to see this slwoly chnage or Banks at least recognise change is needed.

New product for loans on purchases above 400k has been launched by Sabadell in the last couple of months and other Banks are willing to move from standard pricing to secure quality clients.

Who is buying in Spain with credit still tight

Clients buying in Spain and requiring legal services are rising in numbers and many of these are still cash buyers. It is becoming however more obvious that for the property market to recover fully mortgages in Spain must start to flow more easily and product adjustments happen. The Banks now have lending targets so are keeping a watchful eye on each other and once one moves significantly the others will follow.

Read full article:Spanish banks report lower mortgage defaults