July Spanish lending declines

Lending levels reduce in July

Data from both the INE and Notary Offices showed a decline in the number of Mortgages in Spain completed and or registered in July along with a drop in capital lent.

This decline is the first year on year drop in the level of new credit flowing into the Spanish housing market for many months.

Numbers of houses sold also declined as might be expected during the month.

Whats affecting lending

Affected possibly by both the political uncertainty in Spain and the outcome of the Brexit vote it is unclear of the slowdown is a grand or a blip.

Spanish Banks, who are falling behind in their target levels for mortgage loans,Internal market conditions will improve  and who are still experiencing a net outflow of loan capital each month may be hoping it is a blip. Criteria for UK based non residents has however hardened in recent months due to concerns over the ongoing exchange rate situation of sterling.

Political uncertainty

Internal market conditions will improve when a government can be formed. This may be assisted by the standing down of Pedro Sanchez in the last few days. Overall credit into the market was down in July and hit even harder than the housing market was credit for new constructions and business loans.

The next few months

Fixed rate product types continued in July to increase their share of the market and overall interest rates were down from the same time last year.

September and October are normally good months for both sales and Mortgages in Spain but present enquiries whilst remaining at reasonable levels are hard currently to turn into tangible business.

Read the full article:-Spanish loans decrease in July

News for Spanish loans

Spanish loans increase again in June

June showed a further increase in lending over both May of this year and year on year.

Whilst numbers of loans was were down on May levels the average loan size meant that capital lent increased. Year on year the number of loans granted are up 19% accumulated and capital lent up 21.9%.

Mortgages in Spain for the purchase of a home increased in percentage of total new credits in the month of June making up over 60% of all new contracts.

Fixed rates

In a continuing theme for 2016 fixed rate products increased in the share of the total new credits contracted. From a base a couple of years ago of 6% to 7% of all loans, fixed rates now form over 23% of all new lending. This is a fundamental shift for Spanish Banks who up until recently did not often offer a fixed rate at all. Previously all lending was made on a variable rate basis.

Regional performance

Over 2016 the only region to exceed new mortgages made over loans cancelled and redeemed is the Balearics. All other regions still show a net outflow. This is not good news for the Spanish Banks as the contracting mortgage book is and will continue to put pressure on interest earnings and profit from attached products.

Interest rates

Average interest rates increased very slightly in June which may be a reflection of the level of higher but more stable fixed rate solutions now favoured by both Banks and mortgage applicants alike.

Read the full article :- Lending data for June

Changing lenders in Spain

Re-mortages in Spain

Spanish Banks have in general withdrawn from offering re-mortgages in Spain. The reason for the withdrawal started with the need to reduce mortgage books and has continued due to concerns  of taking over another banks loans and the risk of default.

High costs

The costs of moving a loan also prevent a very active re-mortgage market.  

Mortgage deed tax which is around 1.8% of borrowings the largest cost but even if this can be avoided other costs including, bank fees, valuation fees and notary and land registry fees will total around 2% of borrowings.

Gibraltar based Banks

Some homeowners in Spain took out loans with lenders including RBS ( Nat West) Gibraltar , Jyske bank and Nordea  and completed with full term interest only mortgages for up to 15 years. At the end of those 15 years the loan had to be  repaid in full. The lack of a re-mortgage market is hitting these borrowers hard.

On a case by case basis a handful of lenders will look at taking over a loan that has to be repaid and it is one of the few circumstances where this can be considered.

Terms and conditions

Any new loan will be repayment and the new lender will insist compulsory products are taken including bank account, life cover and house insurance. Overall rates will not be as favourable as those the applicant who used Gib based banks had before.

Read the full article:-Current situation for re-mortgages in Spain

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