Mays mortgage completions in Spain continue to fall on last year

Despite having lending targets in place, reducing interest margins and launching new product Spanish Bankhes requesting loas continue to see a decline in new mortgages completed.

Spanish mortgage completions reduce year on year

May figures for mortgage completions in Spain declined on the same month of the previuos year both in terms of number of loans, capital lent and average loan size.

Whilst in the Month of May new mortgages increased from April this is a normal trend for the time of year and is no indicator that things are about to improve.

After many years of actively reducing their mortgage books 2014 has seen most Spanish Banks come back into the lending game. If they thought just opening the doors to credit again would have people flowing into the branches requesting loans, the Banks have been sorely disappointed.

Spanish Banks need to consider their current marketing strategy

With half year figures being well below expectations some of the Banks have started to aggresivley attack the market with new product and marketing campaigns.The real issues that lie beneath the surface are yet to be tackled and include the adding of compulsory products, a fear of the financially comlex high net worth clients and an inability to want to get involved in any areas of lending like re-mortgaging and focussing on purchases alone.

To ensure future earnings, volumes need to increase and the stronger Spanish Banks will need to decide quickly how in a still lack lustre home market they can safely increase credit granted by way of a mortgage.

May key facts 

May saw a decline of 3.4% in numbers of mortgages granted to homes from May last year and annual declines are now over 18%.

Mortgages in Spain completed for residential homes totalled 17,963 and mortgages cancelled in the same period of May totalled 23,405.

Read the full article : Mortgage completions in May is bad news for Spanish Banks

Latest mortgage product improvements in Spain

As per my comments published on the 1st of July surrounding mortgage completions in Spain, and an earlier article in the year the Spanish Banks have reached the half year well behind on their lending targets.

Banks lending targets for 2014

At the beginning of the year for the first time in 5 years most Spanish Banks gave their branch networks mortgage targets. After many consecutive months of net outflows the Banks looked to stabilise and grow their mortgage books through 2014.

Spanish Banks struggle to reach half year lending budgets

Whilst the doors to new mortgage lending was opened little was done by the Banks earlier in the year to encourage new applicants by way of product improvement and pricing.


This lack of understanding that just being open to lend does not mean you will do mortgages has left the Banks well behind their numbers in both capital lent and numbers of new loans particularily in the non resident mortgage market.

Other nationalities applying for a mortgage in Spain have been shocked at the high interest rates which have been well above the rates in many other countries.

With an improving cost of funds situation and better liquidity it is unrealistic to expect new mortgagees to be paying for the past mistakes the Banks have made.

Positive mortgage news for the second half of 2014

The positive news is that in an effort to encourage new mortgages at least 2 of the big 5 Spanish Banks have finally started to introduce new mortgage products, have improved their application process and most importantly are reducing margins above Euribor to realistic and sustainable levels.

The Premier product launched a couple of months ago can now be approved for purchases of € 250k or more down from a minimum of € 400k. The first year premium rate has now been dropped to the first 6 months only and has decreased from a minimum of 3% to a minimum of 2.5%. Variable margins now start at 1.5% above the 12 month Euribor.

With property prices at all time low, currency rates improving and better mortgage terms the second half of 2014 should see an increase in completed mortgages in Spain. 

Read the full article : Spanish Banks drop interest rates to encourage mortgage completions

Spanish mortgages half year news

During the next month the Spanish Banks will take stock of the level of mortgage completions within the first half of 2014.

Mortgage completion levels in Spain

Based on current data all Banks will be behind their yearly targets in both the resident and non resident sector.

Mortgage arrears as a percentage of live mortgage books has hit an all time high and repossessions continue to climb. One of the answers to these two underlying issues the Spanish Banks are experiencing is to grow the mortgage book with performing loans. Whilst each month the Banks have a net outflow of mortgages the percentage of non performing loans will grow.

Growing the mortgage book in Spain

Pressure on the Banks will increase throughout the year in the mortgage arena and further enhancements to product availibilty, a reduction in interest margins and improvements to the mortgage application process are all required in order to stabilise and regrow lending in Spain.

Issues for resolution for non resident loan applications

For non resident applicants the idea that you cannot get a financial approval in place until you have a specific property; and the fact it is not clear with many banks what terms you can expect until after an application has been made and a valuation paid for is completely alien to them; and not in keeping with the transparent and well regulated mortgage process in their own countries.

High margins above Euribor that may have been a necessity during the period of high funding costs for the Banks in Spain are also holding back applicants as often much better terms and conditions can be achieved by using a security in the country of residency rather than taking a Spanish loan.

Whilst there have been improvements during 2014 further rate enhancements, an increase in loan to values, improved financial approval processes and the dropping of compulsory and often unecssary products is required to kick start the non resident mortgage market in Spain.

Read the full article : Mortgages in Spain half yearly update