Banks in Spain go to war

Spanish Banks

The Banks in Spain since 2014 have increased their desire for new business.

Instead of devising a porfolio of products, based on profit required and tailored to applicants requirements, the lenders have kept in place the old fashioned and pricey product structures and just told Branch staff not to lose any new loans based on pricing.

This has led to a significant upturn in Banks being played off against each other.

Is this good for the consumer

Whilst it would appear on the face of it to be good for the clients going through a mortgage application process it is in fact only good for those who know it can be done, and if they happen to walk into a branch behind on targets.

For the majority of direct clients,who will not be aware they could negotiate, or who have not applied to more than one Bank what they may finally achieve will be a very uncompetative home loan.

Is there a better way forward

With the level of risk assessment tools the Banks have and historic information the lenders should and could be capable of putting together a more sophisticated range of mortgage products. They should be able to offer as standard, low cost flexible loans to the best risk clients,and competative and flexible loans to all borrowers.

This should be done at Head Office level so Banks keep control of their margins and the quality of the business. Just selling more of the same but at lower pricing to clients they think they may lose, with no reference to the overall risk and profibilty of that loan, is not how lending should be in the 21st century. Lack of mortgage product regulation means Banks can be less transparent than for instance their UK counterparts but this is still not the right way forward.

Read the full article : Dynamics of the spanish lending market

new home loans completed in November

New mortgages increase for 6 months in a row.

The number of new loans registered at land Registry in Spain showed another increase in lending for the purchase of homes when compared to the year of 2013.

Both numbers of loans and capital lent has been slowly but steadily increasing in the latter part of 2014.

Average loan sizes

In line with the fact house prices continue to ease downwards average loan size fell again in the month of November but this did not prevent a healthy increase in the overall amount of money lent and new mortgage applications made.

Interest rates

Average interest rates continued to drop being some 18% lower than this time last year partly due to the 12 month Euribor decreasing and partly due to Banks shaving margins throughout 2014 to try and attract new business.

The increase in new loans is also having a positive affect on the percentage of bad loans as a more healthly balance of performing loans to bad debt occurs.

Variable rates continued to make up the bulk of the products types with only 7.4% of all home loans completing on a fixed rate basis.

Bucking the positive trend

In a strange move given the more positive signs of 2014 Sabadell Bank increased margins on Monday the 26th of January. This unexpected backward move, supposedly put in place to make loans more profitable will hit the numbers of completions the Bank can make. From market leader Sabadell now sits well back in the pack when considering competitors and are against the trend with other Banks continuing to reveiw interest rate offerings downwards.

Mortgage redemptions

The news is not all good as canceled or redeemed mortgages continued to outstrip by quite someway new loans on books. The shrinking of loan books in Spain has now been happening for over 5 years and at present despite some positive signs this trend looks to continue for a while yet.

Read the full article:- New lending in Spain increases in November

2015 mortgage news for Spain

Improvements in 2014

2014 saw a marked improvement in the lending facilities for non resident buyers in Spain. Previoulsy focussed on only providing mortgages for the sales of their own properties most Banks introduced lending targets again last year.

Key improvements included some reductions in margins being charged, flexibilty for quality applicants, and a willingness to negotiate on some of the terms and conditions.There remained a lack of transparency with applicants not always being offered the best possible terms but in general Banks wanted to lend.

2015 market place

Already in 2015 a number of Banks who were not lending to non residents in 2014 have made clear their intention to focus on this market in 2015. This will increase competition between lenders and should lead to futher improvements both in terms of conditions and service levels.

What needs to happen

Spanish Banks need to move away from the old fashioned approaches many maintain. Improvements would include allowing a financial approval to be put in place before a property must be valued. Having standard pricing which all branches must adhere to with flexibilty to improve on this for very high quality applications. Improving mortgage rates and being willing to do away with costly and unecessary compulsory products. Spanish Banks should offer instead cost effective other solutions which applicants could elect to take rather than being forced to.

Underwriting

The power shift away from risk to sales will continue during 2015. We will not however return to the gung ho days of the boom years. Sensible but pragmatic risk assessment should be the name of the game. A move away from tick box underwriting and back to the ability to look at each application on its merit and in its entirety.

Read the full article:Spanish mortgage news 2015 outlook

Could taking a mortgage avoid unexpected extra taxation

Spanish tax authorities and purchase tax

Due to past activity where black money was a normal part of the Spanish buying process and accepted as the norm by everyone in Spain, the regional tax authorities have clamped down in Spain to a point where what is happening is neither right or fair.

Since the boom years property prices have dropped significantly in Spain but the fiscal values recorded at the Town Halls have not been adjusted to take this into account.

If a buyer whether cash or with a mortgage genuinely pays a price for a property and this is recorded fully at Notary, but this price is below the minimum fiscal value there is a high probabilty that the regional tax office will insinuate that a cash amount was paid to avoid tax. The tax offcie will then apply tax for the purchase at no less than the minimum fiscal value.

There is no arguing with the tax office who will insist this level of tax is paid and will fine onwers if it is not paid on time.

How can the issue be avoided

The first check a buyer should make is to the fiscal value of the property to check the purchase prcie is not below this. If it is then the buyer can either consider paying extra taxes at completion or building up evidence to show they did recrd the true purcahse price accuratley.

A bank valuation or a formal valuation from an accredited valuation company can help. Valuation companies are regulated by the Bank of Spain so if they say the property is worth less than the minimum fiscal value then the buyer has a very strong defence.

If the property is really worth more than you have paid for it then in Spain you will have to expect to pay taxes on a higher amount. This may not be right but is the reality of how things are.

Read the full article: Can a bank valuation help you save tax in Spain

Spains secured credit data for October

Loans granted

In October the average size of loan granted fell by a small amount but numberts year on year were well up meaning capital lent increased in October 2014 to October 2013 levels by 21.7% for urban property and by 14.9% for other dwellings.

The amount of new credit for all dwellings reached over 5.000 million.

Month on Month

In general the overall numbers and capital lent between September to October as a trend dropped. This was partly due to the fact that September 2014 was a particularly bouyant month and that in the months running up to October there has been a marked increase in the amount of Spanish Loans granted and signed for.

Interest rates

Interest rates fell both month on month and year on year as Spanish Banks reduced margins and improved product terms to try and grab market share and the 12 month Euribor the main index to which credit in Spain is linked fell to an all time low.

Most loans completed as is normal in Spain on a variable rate basis with less than 8% of loans being taken on a fixed rate.

Cancellations

For another month despite the positive news mortgages being redeemed exceeded new loans being constituted. This trend will continue to put pressure on Banks earnings as the mortgage books continue to diminish. It is hoped 2015 will reverse this trend and that a net gain on numbers and capital lent will be added to the loan books.

Read the full article: Secured lending statistics in Spain

Benefits of using a mortgage broker in Spain

Obtaining the best mortgage in Spain

Unlike other countries whilst Spanish Banks issue guidelines on minimum terms and conditions for loans, to their branches, local management are left with discretion to alter these as long as they do not go below the minimum stipulated.

This practice means that what a direct mortgage applicant may get offered, if they walk into one branch of the same bank, may vary to what they would achieve if they selected anoher Branch.

Branch managers can and do increase the rates and insist on compulsory products not normally attached to the loan in order to enhance their overall profitibilty.

If a direct client happens to apply for a loan when that months targets have been met they may find a very unattractive home loan is offered on the basis the Branch only want the application if it is going to offer them an unuaslly high level of profit.

With no central control on what terms and conditions can be offered direct clients of the bank may not be getting the best deal possible.

An independent and experienced Spanish mortgage adviser will know what are the best rates possible within any Bank and will ensure their client gets underwritten with this in mind.

Clarity on the application process

Applicants who apply direct to Banks often believe due to staff feedback at the Bank that the application is further down the approval process than it is. Many clients think they have a mortgage offer when all they actually have is an acceptance to look at an application. A loan is Spain is never secure until the file has been sent to the central risk teams and a valuation has been undertaken.

Some Banks, if you apply direct inisit a valuation is undertaken before a risk assesment is made on the financial data so sometimes even after valuation has been paid for you cannot be certain your loan is secure.

Independent advice

Appointing an independent advice company to work on the buyers behalf at each stage helps avoid confusion, ensures the process is clear and quick and most importantly ensures the best `possible terms and conditions are secured. 

Read the full article:- Mortgage brokers in Spain

Loan completions in Spain

September mortgage completions

Good news for lending in Spain was published yesterday with another month of increases in terms of both numbers of new loans constitued and capital lent.

The level of home loans between the month of the August and September was the highes for many years and overall numbers of credits granted for the same month of the previous year was up 29.83%

2013 versus 2014

Whilst the number of mortgages in Spain has increased for the last few months, due to very low levels of activity in the first quarter, 2014 remains slightly behind the levels of the same time in 2013. The current trend however if followed through in the final quarter of 2014 should mean that for the first time in over 6 years we see either a level or slight increase in total loans on a year on year basis.

Interest rates

Average interest rates fell in September due to a continuing drop in Euribor which most Spanish Banks track and an easing of margins. 

Overall mortgage books

Whilst yet again the amount of mortgages redemmed outstripped new loans completed the gap has narrowed considerably. After many years of loan books reductions this will be positive news for the Banks who for the first time this year since 2007 have had lending targets. Whilst it is unlikely the lending targets will be achieved by most Banks the signs are positive for a better 2015.

Read the full article:-Spanish news. Positive signs for Spanish lending