Mortgages constituted in Spain for August 2013

Today saw the release of the monthly Spanish Mortgage statistics for August 2013 as supplied the by the national statistics office.

Whilst the overall numbers showed that in terms of average loan size there was an increase from the same month of last year, when this was broken down into just residential dwellings ,the average loan size for homes had in fact dropped. The drop in loan size for dwellings will reflect perhaps lower house prices and lower loan to values being granted.

When looking at the numbers of Spanish Mortgages granted and signed rather the average loan amount the decreases in all areas reported on are considerable. August 2013 showed another month of downward trends in terms of numbers of loans and capital lent against, August of last year, when compared to month of July 2013, and on a year on year basis.

Average Interest rates remained relatively stable with a small fluctuation upwards from July 2013. The last couple of months have seen the Euribor edge up slightly and Banks continue to increase margins above rather than decrease them.

The most worrying statistic coming from the monthly data is that for another month the amount of mortgages being canceled outstripped by some way the amount of new Spanish Mortgages constituted. There remains in August as in other months a large outflow of mortgages in Spain as Banks continue either by design or due to lack of demand to shrink their overall mortgage book.

A shrinking mortgage book will eventually put severe pressure on earnings as well as causing the level of bad loans as a percentage of the overall book to increase, even if the number of mortgages in default drops.

In a recent statement BBVA stated they expected the trend of net outflows for mortgages in Spain to continue for the rest of 2013 and that there would be an increase in numbers of mortgages completed in the latter part of 2014. How real this prediction is will remain to be seen. The trend relating to negative outflows of loans saw an overview of the possible earning pressures and impact on Spanish Banks by the lack of new Spanish Mortgages being constituted being released last week by an investment advisory company in the US as a counter to more positive news about Spanish Banks and their liquidity.

At grassroots levels we continue to see banks focused on granting mortgages for their own stock rather than for the purchase of independent sales and a continuing usage of high margins and linked products to discourage demand.