Spanish Banks assess risk of Brexit

Risk managers are cautious

Post the Brexit vote no lenders in Spain have changed their criteria for risk assessment but all risk teams have expressed some concerns.

None of the Spanish Banks want to alienate UK loan applicants as they form the largest part of their non resident market but some of the financial uncertainties have to be considered.

Currency exchange rates

Currency exchange rates are by far the biggest concern. Already we have seen a large drop in Sterling with no indication in site as to where this might level out. When assessing affordability of a Mortgage in Spain how much finally per month the loan will cost has an impact on the debt to income ratios.

If sterling continues to drop the cost of the loan each month will rise and may make it difficult for marginal applicants to support the payments going forward.

Other considerations

Other matters like the stability of the UK economy and what impact this may have on business owners and employed individuals is also of some concern to the underwriters but will not and does not have such an immediate and obvious affect as the currency fluctuations.

Commercial teams

The commercial teams of the Banks in Spain may find themselves in coming months at odds with the risk teams as one side looks to minimise possible risk and the other looks to build lending to meet the yearly budgets for non resident mortgages in Spain.

Read the full article:- Mortgages in Spain post Brexit news

Expat loans in Spain

Expat mortgages in Spain

A number of recent changes due to the credit directive in the EU and the outcome of Brexit has thrown into question the opportunity for lending facilities in Spain.

Many expats living and working outside the EU are wondering what if any borrowing they can take when buying in Spain.

The reality is that nothing has changed for the Spanish Banks at this moment in time and there are no indications that anything will.

Whilst a number of UK and Irish Banks withdrew expat loans earlier this year the facilities for a mortgage in Spain have not changed immaterial of what currency the applicant earns their income in.

Terms and conditions

Expats from countries outside the EU can expect to gain slightly lower loan to values than those based in the EU but broadly rates are the same.

For some Banks in Spain the ability to add life cover to a loan for someone outside the EU is not possible so from this point of view the applicant may actually find they have a benefit.

Document requirements 

In areas like the UAE which has no personal tax system, the level of bank statements required to prove incomes may be higher than for other applicants, covering a full 12 months. Other means to confirm debt situation in the absence of credit files will also be required. Document requirements will be different for each application.

Spain can continue to be a good half way house for expats who have no desire to retire or semi retire back to northern Europe. Climate, quality of life and cost of living will continue to be attractive.

Read the full article:-Spanish loans for expats

Home loans in Spain increase again

Lending in Spain during May rose again.

2016 loan levels in Spain for the purchase of homes has increased each month throughout the year.

Numbers of and capital lent have seen increases in excess of 20% both inter monthly and annually. Average loan sizes surprisingly fell in May although maintained a small increase over same month of last year.

Notary offices report house price fall

According to the Notary offices the average price per m2 of property fell away in May down by some 5.1%. Whilst mortgages in Spain are rising the expected growth in house prices apart from a few regions remains a hope rather than a reality.

Fixed rates surge ahead

Fixed rate product types continue their surge. Over 19% of all new loans secured in May were on a fixed rate basis. This compares with less than 10% a few months ago. Variable rate products continue to be linked to the 12 month Euribor as the index of choice and with the Euribor in negative territory many lenders are considering writing a base of 0% into the contracts to protect themselves from negative interest rates.

Spanish Banks

Defaults fell in the last quarter so whilst the Banks in Spain continue to see net outflows each month the level of loans in arrears as a percentage of their books is falling all be it slowly.

Mortgage applicants are beginning to work out that with some lenders you can avoid compulsory products after year 1 if you elect to take a fixed rate mortgage product type. Some Banks are avoiding cancellation of these by adding life cover as a lump sum at completion.

Competition for the resident market remains fierce but we have seen little to no movement on rates or conditions for the non resident market since the start of the year.

Read the full article :-Spanish lending up again in May

Impact of Brexit on Spanish Loans

What does Brexit mean for buyers in Spain

Many mortgage applicants who are either considering taking a loan in Spain or are currently applying may be wondering what impact the Brexit vote will have.

At present none of the Spanish Banks have specifically changed their standard terms and conditions and the chances that officially they will do that in the immediate future is remote.

The UK market is important one for the lenders in Spain, forming the bulk of their non resident lending and at a time when they are looking to increase lending anything that puts borrowers off applying before impact can be considered properly is unlikely.

The commercial department within the Banks will want to keep the status quo for as long as possible and it is also the case that most lenders in Spain like the rest of the world had a though that a remain vote would be the outcome.

 View of risk teams

The risks teams within the Spanish Banks may however take a slightly different view. Their job is to protect the Bank against the potential outcome on defaults of the leave vote. The risk teams will be more cautious when granting loans due to the many unknown quantities on the UK economy, in terms of jobs, legislation changes and the affect on sterling.

We can expect to see risk teams turn down the more border -line applications and or restrict more heavily the loan to value, loan size and in some cases pricing.

 What might the outcome be

This means that whilst we may not see immediate wholesale changes, the risk teams may start to look at applications in the same way as they currently do for non EU nationals applying. Flexibility on underwriting and loan to values are more heavily scrutinized for those outside of the EU than those in it, for a number of reasons.

Due to the drop in sterling it may make sense for the short to medium term for potential buyers to take a Spanish Mortgage even if they have the cash to minimize the impact on total cost of the pound buying less euros. This will have to be balanced against the longer term objectives of the applicant and their view of what the future will hold for the UK economy, sterling and their own individual prospects.

Read the full article :- Will Brexit affect Mortgages in Spain

April loans and house sales in Spain

Growth continues in Spain

Growth in terms of both house sales and mortgages in Spain moved forward in April but in some areas growth slowed.

Overall new build sales continued to lag behind that of resales and the level of increase in house sales which had grown since June 2015 to November 2015 fell back in the first quarter of 2016.

The stalling of the market may have been due to uncertainty surrounding the countries leadership after the first general election in November and may be buoyed going forward by the second election which has just taken place.

Spanish Banks

Spanish Banks are certainly keen to lend so financing is not the issue. One interesting outcome of the data issued in June was that the percentage of house sales bought by way of a mortgage in Spain only reached 45% in April. This compares to levels topping 70% in a normal month.

Lenders in Spain  will hope this is a one off and despite this drop in those using finance to buy for the month loans in Spain  increased.

Mortgage lending was up both in terms of capital lent and numbers of new loans. The increase over march levels was lower than perhaps is normal but year on year and annually accumulated the market remains on upward trend.

Interest rates

Fixed rate product types continue to form a larger percentage of the total market rising to 14% of all home loans taken as they are deemed to be the best buys. The average interest rates is settling around 3.20% for the year so far.

The Euribor itself rose slightly in May but dropped back again for June but the stability in rate will be partly down to a preference for both mortgagees and Banks to consider a fixed rate contract.

Canary Islands

Regionally the only area which appears to be struggling across the year to date is The Canary Islands. A natural haven for expat buyers this may have been affected by external matters outside of what is happening in Spain.

Read the full article :- Property and loan market in Spain

Growth slows for Mortgages in Spain

March lending figures down on February

Whilst year on year for the first three months of 2016 lending levels of Mortgages in Spain are up on 2015 in March the rate of increase slowed and across both numbers of and capital lent when assessing the data against February.

The trend of lower loan levels in March is normal but with the housing market appearing to be recovering and Spanish Banks being eager to lend it is slightly surprising we are not seeing month on month increases.

Fixed rates

For 2016 the momentum for fixed rates being chosen as the mortgage product type by applicants is continuing. Each month the share of new loans being completed on a fixed rate basis increases. Whilst from very low levels the increases are significant and show a marked change in the market. All Spanish Banks are now pushing and providing access to fixed rates.

 Lack of clarity around early redemption penalties for some lenders will hold back this trend but in general the fixed rate market looks to be a good medium to long term bet.

Average Interest rates

Average interest rates fell in March due partly to the move to fixed rates and a drop in Euribor over the last couple of months. Whilst still in negative territory for May there was a very small increase the first increase in many months.

Mortgage books

For yet another month the amount of loans being cancelled outstripped new loans being constituted. After many years of actively reducing their loan exposure Spanish Banks will remain concerned about future earnings until this trend can be reversed. Currently there appears to be no end in site with only one month in the last 6 years showing a net gain. Pressure on earnings form this area and the environment of low interest rates means the lenders have to up their game in cost efficeincy and further mergers may be seen this year.

Read the full article:- Loans in Spain for March fall over February

Housing and Banking data in Spain

General statistical reports Spain

Last week and this week saw a number of reports published in Spain in relation to house sales, transfer of property rights and the Spanish Banks.

Overall the transfer of property from one individual to another saw a dip in March both year on year and month on month. When the statistics are broken down the sale of actual homes whilst down on Februarys figures never the less are holding up year on year and annually accumulated.

Drops in urban commercial sales and lower levels of swaps and Inheritance affected the overall figures as did a lower level of transfers falling into other titles which includes Bank repossessions of security half for a mortgage in Spain.

Number of house sales

A total of 31,925 homes were sold in March of such only 6,200 were new builds with the rest being sales of second hand homes. This split is a far cry from the boom years when new build sales outstripped resales.

Sales of homes to foreign buyers both those who are living in Spain and those specifically buying a second or holiday home saw an increase through 2015 of 12.9% according to the council of Notaries.

Foreign buyers are made up of all nationalities but the largest group by quite some way is the British. Foreign buyers who lived in Spain during 2015 bought at a lower price per meter square than in 2014 but those who did not live in Spain paid 2.9% more per meter square than in 2014. This may be due to a number of factors, where they buy, type of property they buy and how they sourced the purchase.

Easing of lending to the non resident market during 2015 and an increase in the number of mortgage product types available assisted the market.

Spanish Banks

Spanish Banks also came under pressure last week as the first round of quarterly results for the major lenders showed a drop in profitability due to margin pressures. With interest rates at an all time low it is difficult to the Banks to remain competitive and still make money.

Further consolidation is expected during 2016 with more mergers possibly on the cards and a further streamlining of the branch networks.

Read the full article:- A mixed bag of Spanish data