Spanish mortgage trends for February 2014

Released today are the mortgage figures for Spanish Lending within the month of February.

Despite some positive news reported this week relating to the overall situation of Spanish Banks this has yet to feed through to an increase in new loans constituted.

The data which is taken from land registry is always a little behind the curve as it can take up to three months from completion for Land registry to report, but looking at year on year figures the trend is still downwards.

Year on year mortgage figures

Year on year the number of Spanish loans have dropped by 32.7% in comparision to last year and 33.7% down on capital lent.

Interest rates

Average interest rates at 4.11% is slightly down on Januarys average rate and is the lowest average rate for Spanish Loans since March 2013.

44.5% of all mortgage products granted related to residential loans showing a higher split of all loans relating to other Urban properties which suggest an upturn in commercial lending.

Regional variations

The Balearics continues to be the region where the decrease in mortgage activity is at its lowest on a year on year basis which ties in with this regions better  than average house sale performance

Read the full article : February mortgage news for Spain

Changes to UK mortgage market bring it closer to Mortgages in Spain

Announced today by the regulatory body covering UK lending were new rules that must be implemented when a Bank assesses an applicant for mortgage purposes.

What are the changes to how mortgage applications will be approved

The two key changes are a move away from gross income multipliers to looking at affordibilty based on actual incomes and outgoings and the introduction of a benchmark interest rate of 7% against which all applicants must be assessed to allow for future rate increases.

How do applications for mortgages in Spain currently work

For years Spanish Banks have worked to affordibilty ratios based on net incomes as shown on personal tax returns versus outgoings on debt and loan repayments. In general terms each Bank looks to see that outgoings do not exceed on average 35% of incomes. The documents required by a Spanish Bank will reflect the need to check expenditure in these areas.

Whereas the Spanish Banks only take into account expenditure on debts, it is reported that UK lenders will also be required to take into account all outgoings which could include things like Gym membership, Pension contributions and telecommunication contracts.

Why the changes to mortgage assessment

Whilst it could be argued that working to affordibilty ratios has not helped the default situation for Spanish Banks this is against a background of severe and unusual economical turmoil and the situation could of been worse had affordibilty ratios not been the key underwriting tool. The changes in the UK are to ensure that mortgages are granted without stretching the applicants resources to breaking point should rates increase or the mortgagees situation change.

Will the changes dampen the housing market in UK

It is possible the new restrictions could depress demand. A tighter mortgage market with less flexibilty on criteria has certainly had an impact on overall lending in Spain.  For UK residents however a mortgage in Spain remains normally attached to the purchase of second home and not a main residence, the impact of the new rules will be more profound where linked to what is a primary residence.

Read the full article: Changes to UK mortgage market bring risk assessment in line with Spain

Outlook for mortgages in Spain

Early data published by the INE shows little sign of improvements to the level of mortgages being granted in Spain.

Is there any positive movement for Spanish Loans 

Whilst upfront activity of buyers going through the mortgage application process has been higher in the first quarter indications are from the Spanish Banks that targets for mortgage completions in the first quarter will fall below expectations.

January data out from the INE in Spain seems to support this with January figures showing a decrease in loans constituted below those of the previuos year.

February figures may be a bit more encouraging as January year on year figures will still reflect the fact in late 2012 many buyers raced to complete to beat the end of the tax breaks. The figures shown in the data are from Land Registry not Notaries so there is a lead lag on timescales.

What were the key indicators for January

Overall numbers of Spanish mortgages were down year on year and the numbers of mortgages completed in January in comparision to the December showed a lower increase than the same data from 2012/ 2013. 

Average loan size was up by 1.3% and average interest rates rose slightly as well.

Fitch Ratings Agency annual mortgage report

In a seperate report Fitch ratings agency threw caution on the Spanish Mortgage market and the overall situation for both property prices and arrears throughout 2014. Fitch anticipate arrears peaking in 2014 before starting to fall and alos predict they expect property prices which have fallen by an average of 36% to continue to drop to an average of 40% from the peak before starting to recover in 2015.

In the last quarter of 2013 Spanish banks sold property from their stock at more than 70% below the original valuation levels. This compares with the average discount of 48% since 2009. The indications are Banks are now heavily discounting property in order to clear their books. In order to dispose of large portfolios in one go it is necessary for the Banks to heavily discount prices for the Investment Funds that have popped up over the last few months.

Read full article : Mortgage market indexes in Spain

New Spanish Mortgage product for Nothern Europeans

In the last few weeks Banks in Spain have been opening up for credit.

What are the changes

Whilst this is across the board the Banks are very focussed at present on attracting for mortgages the Northern Europeans.

Falling into this pot are all the Scandanavian countries, Swiss nationals along with the Dutch and those residing in Belgium.

Why are the Spanish Banks keen to attract these clients

There are a number of reasons why the Banks are focussing on these populations. Firstly there are higher numbers of them purchasing in Spain due to low purchase prices and good exchange rates. Secondly the Spanish Banks experience of clients from these countries is that they are less likley than others to default, and thirdly the general veiw is their home economies are stronger than the UK and Southern European countries.

The key incentives the Banks have put in place to gain new business are a reduction in mortgage rates and higher loan to values. For the Scandinavians and Swiss they will benefit from both ends, an increase to 70% loan to value and a reduction in rates. For Dutch and Belgians it is an increase in loan to values from 60% to 70%.

What facilties were available before

Prior to the new mortgage services and products being available only NYKredit a Dansih Bank offered special terms for clients from Sweden, Norway and Denmark. Whilst their product remians attractive they only cover certain parts of Spain and have minimum loan sizes.

The changes are to be welcomed as part of the overall recovery in Spain but in order for things to start flowing it needs to be recognized that margins must come down across the board for all nationalties.

Read the full article : Mortgage news for Scandanavians, Swiss and German Buyers in Spain

Official figures from the INE on Spanish Mortgages

Levels of new loans granted

the level of mortgages granted in Spain in December 2013 as expected were down for the year on a month by month basis and a total year.

Number of new loans  secured against dwellings fell to 12,329 in December down some 30.1% from the same month of the previuos year.

Whilst siginificantly down on last year December 2012 was a better month for completed new loans skewed by buyers buying in Spain to beat the removal of tax breaks that were withdrawn at the end of 2012.

Average loan sizes also dropped in December to € 101.494

Regional variations

Coastal areas held up better in 2013 than the City areas which is possibly a reflection of who is buying in Spain. Non resident mortgage applications toward the back end of 2013 were higher than the start of year.

In the more resident areas like Madrid new loans garnted fell by more than 50% in the month of December.

Average Interest rates and term

The average interest rate for new loans constituted in December was 4.32% which was around 3.78% above the 12 month Euribor.

The average term over which new loans were granted in December was 20 years.

2013 Full year figures

Spanish Mortgage numbers decreased by 27.8% for the whole year. Given each year for the last 5 years the number of new loans granted have decreased significantly hitting overall decreases each year of 20% or more the levelof lending in Spain is now significantly lower than at their peak and well below historic norms.

The level of mortgages being closed within the month topped the 20,000 level in December meaning we had another consecutive month of a net outflow of mortgage balances from the Spanish Banks books. Not split out is how many of these redeemed mortgages related to Banks taking over the property and how closed due to the loan being paid off in full.

2014 what to expect

2014 should show an improvement in overall levels of mortgages granted. For the first time in many years the Banks have lending targets and we are already seeing a small but not insignificant price war happening where the client wants lower loan to values and has low debt to income ratios.

Read the full article: Loans in Spain official figures for December

Reductions in Spanish mortgage rates

What is happening in the Spanish Mortgage market

In an effort to increase in 2014 the level of Spanish mortgage loans, Spanish Banks  have started to launch new mortgage product and decrease overall rates.

The first area to see a change was in the reduction of the first year premium rates from being above the prevailing variable to offering first year rates that are below the current variables.

Moving on from this trend we are now seeing Banks reduce overall mortgage terms and decrease the margins above Euribor for subsequent years.

Spanish loan pricing 

For the last few years we have seen a regular trend of upward margins above Euribor across the board. Back before the crisis in Spain began margins were in the region of 1.25% for non resdients and as low as 0.50% above for residents of Spain. During the crisis these margins moved to as high as 6% above Euribor for non residents and 4% above for residents.

Gradually over the last few weeks we have seen the pricing drop for both international clients and residents of Spain. Some of the best rates out in the market are now as low as 1.95% above Euribor for fiscal residents and 2% above Euribor for international applicants.

Other Banks who have not reduced standard pricing are now however open to negotiation for quality applications.

Compulsory products

When buying in Spain those clients who require a mortgage will still find the rates offered come with linked products. These linked products will always include life cover which is often added as a lump sum at completion to ensure the cover is not cancelled at a later date.

How long due to new European supervision creeping in Spanish Banks will be able to maintain this practice remains to be seen.

Mortgage applicants should always check the FIPER which is issued at offer to see what linked products they are going to be required to take.

read the full article :http://www.imsmortgages.com/blog/reductions-in-interest-rates-latest-news-for-spanish-loans/

Spanish Lending news

News for lending in Spain relating to November 2013 was published yesterday.

Who publishes the Spanish mortgage news

Each month the national statistic office in Spain publishes data taken from land registry as to the number and types of mortgages completed.

In November 2013 there was yet another month of reduced mortgage lending against residential property. This trend has continued for a number of years but was slightly skewed by the high number of completions in the previous year as buyers rushed to Notary to complete on purchases before tax breaks were withdrawn.

Are there positives to be taken from the data

It is dificult to say whether Novembers data is just a continuation of the previous trends or a blip caused by unusual activity from the same time the previous year.

The first few months of 2014 will dictate whether the corner has turned on mortgage lending in Spain or if we still have a way to go.

What is the current attitude of the Spanish Banks

Whilst not as yet showing in the figures published there is now a desire within the Banking industry to start lending again.

Whilst the past few years have seen Spanish Banks reduce their mortgage books by design, it would appear the tide has turned.

In order to maintain their current customer bases and all the linked products that a mortgage brings Spanish Banks have this year re-introdcued lending targets and appear to have some flexibilty on pricing for the right clients and an improved mortgage service.

Read the full article :News for Spanish Mortgage lending