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

Finally and increase month on month of property prices in Spain

Data released this month by TINSA one of the most highly used valuation companies by the Banks in Spain for valuation purposes suggest the tide is trurning on price per square meter.

Property price increases from April 2014

Whilst prices in the month of May taken from a selection of formal valuations undertaken continued to show a decline for the year the May average price pre meter increased from April in all areas excpet the Islands.

The largest month on month increase was in the Coastal regions which fits with the upturn on mortgage applications in these areas from International buyers.

The Cities of Barcelona and Madrid and Valencia also saw a month on month increase suggesting in the traditional holiday resorts and areas of commerce activity the bottom of the market is very close.

A wind of change or just a blip

Since the beginning of the second quarter activity levels in terms of buyers and mortgages has increased noticeably. Valuations for mortgage purposes seem to be indicating that property can now being bought at below the level the valuation companies believe could be achieved. All these matters are helping activity and will finally follow through to an overall recovery.

Price increases are likley to be slow but steady in certain areas of Spain and a more fluid mortgage market is still required to push matters along. We are however appearing to now be at the bottom of the curve and moving in the right direction.

Read the full article : Monthly house price report for Spain

Mortgage news in Spain for April 2014

With Spanish Banks activley promoting mortgage lending in 2014 this desire to lend is yet to filter through to completed loans.

April mortgage figures

The April figures published today will make unhappy reading for the Banks in Spain, who continue the trend of large outflow of loans with more mortgages being redeemed than constitued in the Month.

Unlike last year when there was an increase in completions between the March and the April 2014 has a drop of 7.8% in number of loans granted between the two months and the accumulated yearly figures are now down by over 20%.

Are any areas showing a year on year increase

Of the regions in Spain outside those with very small numbers like Mellia only the Canary Islands is showing a year on year increase in numbers of Spanish loans completed. Month on month Balearcis and Cataluna were up in April.

Andalucia completed on the highets number of loans but remains down both month on month and year on year.

Average interest rates

Average interest rates dropped in the month reflecting a continuing pressure on margins as Banks vie with each other to grab what activity is in the market. New product has been launched in the last few weeks to capture business.

Prognosis for 2014

Enquiry levels are increasing and all the data coming out of Spain suggests property sales are increasing so through the year when this filters through to the data the numbers should improve.

Read the full article: April mortgage completions in Spain

Fixed rate mortgage offerings for Spain

This week saw the launch of some very favourable fixed rate loans in Spain.

Historically fixed rates in Spain have been offered at well above the variable rate and have not been an attractive alternative for those buying in Spain.

In complete reverse to this normal state of affairs one bank in Spain has launched a range of fixed rates that are actually below their normal first year premium rate and are only slightly above the current variable which relies heavily on the 12 month Euribor staying at is current low levels.

Given margins above Euribor being charged by Banks in Spain are now on average 3.25% to 3.5% a good long term fix to hedge against future Euribor increases, which ultimatley will happen over a period of time, looks to be sound judgement which will pay off in the long term.

What are the problems associated with fixed rates in Spain

Whilst applying for a fixed rate mortgage in Spain, from a financial stability basis is looking to be a viable option the process of application remains fraught with difficuties.

Applications for fixed rate loans in Spain have levels of uncertainty applied to them which include what rate you will finally be offered, what your redemption penalty would be if you redeem early, and the timescale it takes to resubmit an application if finally the rate being offered is not what you were expecting.

What are the best rates available

You can currently apply for
15 years @ 4.2%
20 years @ 4.45%
25 years @ 4.60%
30 years @ 4.65%

Read the full article : New fixed rate mortgage offerings in Spain

Property price news in Spain

Data issued today by the INE in Spain showed further signs that a property price recovery is on its way.

Spanish property prices past and present

Since 2007 property prices have dropped in Spain on average by 40% and in some regions by even more.

The property collapse in Spain fuelled by an oversupply of property stock, general Spanish, European and worldwide economic pressures and a lack of credit in the sytem has deterred buyers for a number of years. With Spanish Banks announcing lending targets this year and a relaxation of finance in Spain along with an improving economic environment has encouraged buyers of holiday homes and investment to start to look at Spain again.

Property price data

Four regions showed for the first time in a number of years a postive annual growth in quarter 1 of 2014 and all areas showed for the first time a decrease in the level of price reductions.

In general new houses performed better than resales but this was partly skewed by a change in the weightings used by the INE with a larger percentage of overral sales being shifted toward resales in comparision to the base year of 2007.

Spanish mortgage availibilty helps spur growth

With an increase in mortgage applications being published last month and two quarters of growth all be it small on GDP the assumption that house prices would stabilise in Spain during 2014 and show some grwoth during 2015 now seems to be a reality.

Read the full article : Quarter 1 offcial data for Spanish property prices

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