2017 loan outlook Spain

What happened in 2016

2016 was a year of little change for Spanish mortgage applicants abut major market changes for the Banks.

Spanish Banks had a number of challenges thrown at them during the last 12 months.

Market conditions affecting lending

These included a number of factors. Firstly the Banks lost their case on floor rates meaning they had to remove them from new and existing contracts and compensate borrowers who had paid more interest than if the floor rate had not been in place.

Secondly Brexit hit hard both the non resident buying market and the cost of buying in Spain as sterling was hit hard.

For a short period this currency fluctuation brought in new business as cash buyers sought to gain a loan but long term the drop in sterling will affect the buying market in total.

No cohesive Government in Spain after the July elections held back the housing market as Spanish buyers held off on high ticket items such as a home until the political landscape and taxation levels became more stable.

December court case lost

In December the Banks lost another court case on the normal practice of passing on the registration costs of both purchase and mortgage deeds to the borrower. The implications of this in the current low margin lending market have yet to unfold.

Cost of funds started to increase and fixed rate product types which saw very low interest rates halfway through the year started to climb and will continue to do so through the first few months of 2017.

Will risk assessment be relaxed

The only areas the Banks still have control over are risk criterias and flexibility of product types. If they are to meet the loan targets they want in 2017 the Banks are going to have to look closely at what in this challenging market allows them to increase profitability without losing volume or market share.

Read the full article :- Spanish lending news and views for 2017

October loans in Spain

Levels of lending in Spain during October

Levels of borrowing in Spain fell from the previous month of September but remained up on the same month of 2015.

This data is in line with normal market trends where only once in the last 5 years have Spanish Banks increased their completions in October over September.

Average loan amounts

Average house prices nationally continue to fall and this is reflected in the average loan size. Regionally the fall in house price and loan size is not across the board with certain hotspots seeing increases.

October was a bad month for levels of loan registered within most of the traditional holiday home regions this may be due to UK buyers holding off somewhat until the impact of Brexit is known.

Product types and interest rates

Mortgages in Spain completed with a slightly lower percentage being contracted on a fixed rate product type basis and interest rates rose very slightly.

Best buys in terms of fixed rates are not now as competitive as they were as cost of funds have risen in the market.

Loan cancellations

Loan cancellations which were below new borrowings in September increased again in October giving a negative outflow for Spanish Lenders.

Based on completions our prediction is that lending levels will be buoyant for the last two months of the year.

Read the full article:- October Mortgage completions in Spain

Spanish lending during 2016

The last 12 Months

2016 has seen a number of changes in the Spanish mortgage market. Outside pressures like Brexit have affected the buying and mortgage application market with UK buyers being the largest population of non residents in Spain.

FX rate fluctuations

Foreign exchange rate fluctuations have been vast during the year rising as high as 1.42 and dropping within weeks to 1.10. For those buyers outside the Euro this has a massive affect on the price being paid and has pushed some cash buyers towards taking lending in Spain until the pound recovers.

Fixed rates

The biggest change in the loan arena in Spain is the rise of fixed rates. From almost a total variable rate market fixed rates now make up over 20% of all loan completions each month.

Spanish Banks now hold a range of full term fixed products ranging from 5 years to 30 years.

Risk

The Bank of Spain has sought during the year to keep lending under control and the Risk teams within the Spanish Banks have not thrown caution to the wind. The outcome is another year of net losses to the mortgage book and a year of missed targets.

Compulsory products the surge of Spanish lending remains a key issue for mortgage applicants but very competitive fixed rates have helped overcome this.

Read the full article :- 2016 Spanish loan overview

Spain shows healthy rise in home loans

September Data

September Spanish home loan levels rise nicely during the month of September.

The monthly increases were off the back of an unusually high level of new loans registered in the month of August. Year on year and annually month on month, after Julys set back the last three months have seen new credit move forward.

Average loan size helps capital lent increase

Average loan sizes rose in September to their second highest level in last 12 months and this along with higher numbers pushed total Mortgages in Spain for the purpose of buying a home to over the 3.000mk.

Interest rates drop slightly

Average interest rates dropped slightly in the month to 3.17% and the level of loans contracted on a fixed rate basis rose a little.

Other lending sees a decrease within the month

Signings for home loans also saw a similar increase in the month although lending for other purposes dropped back. This may improve now business have a clearer view on the political landscape.

Construction loans for new builds fell back in the month and remain very low in terms of numbers of.

The Spanish Banks for only the second time in over 5 years actually added to their mortgage books as new lending levels was higher than cancellations.

Read the full article:- News for home loans in Spain

Regulation changes in Andalucia

Regional loan changes

The region of Andalusia brought into force in October new legislation relating to information documents that must be given to a new applicants for a mortgage in Spain, and a calling off period.

After many years of Banks in Spain hiding clauses like floor rates it is good to see new rules being enforced but in typical Spanish style the new rules do little other than add to the time it will take to complete on a loan and the level of paperwork that will need to be signed.

All the new documents could have been rolled into two rather than the five we now have.

Up to five days cooling off

A cooling off period is not a problem except that technically of a completion must be delayed all the documents will need signing again rather than those presented for the signing that did not happen being able to be used for the new date.

Mortgage completions in August

August completions both signings at Notary and registered loans at Land registry rose in August from July. It would seem that a number of July completions slipped into August as it is unusual for August mortgage levels to be higher than Julys.

Year on year August also saw an increase on the same month of the previous year.

Interest rates remained stable for the month at 3.26% and fixed rate product types continued to grow as a percentage of all new lending.

Spanish banks continue to see a reduction in their lending books as redemptions outstrip new loans for yet another month.

Read the full article:-Spanish loans monthly update

Sterling crashes

Pound versus the Euro

The reduction in the value of the pound in the last few weeks and the complete crash of last week will affect those planning to buy a property in Spain.

For those already committed to a purchase who have signed a Private Purchase Contract the fall will affect them immediately. A fall of fx rates from 1.21% to the 1.11% seen can affect the cost by € 10k on every 100k.

If there is time within the agreed contract a buyer could consider taking a Mortgage in Spain to help mitigate this extra costs and to manage the loss over a period in time and or hedge against the pound recovering somewhat in the next few months.

Mortgage in Spain

A loan in Spain will cost about 4% of what is borrowed to set up but with a good range of fixed rates available that fix the rate for the full term this might be a better option than losing out now.

If the pound recovers in the short to medium term many fixed rates have reasonable early redemption penalties that allow the capital to be paid back when it suits the borrower.

For those potential buyers who are not yet committed but wish to continue looking at Spain for a second home getting in place a fiscal approval for lending before searching for property will give them peace of mind on budget and overall costs leaving only the deposit monies and costs open to exchange fluctuations.

Longer term affects

In the current environment Spanish Banks are being cautious on debt to income ratios ad there may come a time when they assess this against a pound that is the same as the Euro in terms of value.

It will remain to be seen how much affect this drop in sterling will have on the overall market in Spain given UK buyers are the most prolific after Spanish residents.


Read the full article:- Sterling falls affect buyers in Spain

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