Spanish mortgage news

Last week and again this week a tranche of data has been released in Spain.

Apart from the fact that the trade surplus is a positive most of it did not make happy reading.

Some of the issues like rising mortgage delinquencies are as a consequence not just of rising numbers but because for the last year the amount of money being lent has been less than the loans redeemed. In a shrinking mortgage book therefore the number of loans gone bad will rise as a percentage of the total book.

Lending has fallen away most heavily in the resident cities and large towns. Pockets like Andalucía still show reasonable numbers as lenders lend in these areas to non residents as well as residents.

Numbers of loans being granted for holiday home owners etc appear to be stabilized at last year levels and may well increase as banks become more rather than less active in lending against their own properties in effort to sell them.

The last few weeks there has been renewed activity in the area of mortgage enquiries relating to new builds. As the 4% IVA, which is a discount to the 10% it will revert to in January 2013 comes to a close, people are trying to select and complete before the 31^st Dec deadline.

International Mortgage Solutions
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Mortgage and finance update

This week has seen a number of mixed messages coming out of Spain.

On a positive note Q2 saw the highest amount of property sales to foreign buyers recorded for 4 years.

On a more negative note,( dependant which side of the fence you are on), house prices continued to drop reaching 2004 levels, with an expectation prices will drop further over the next 12 months. It has always been my personal view that prices would need to drop to 2002 levels before any sort of recovery happened and we are looking very much like we are heading this way.

The Spanish independent Bank audits are due out this week with the Spanish Government stating that the amount of cash required will be in line with the previously expected 60 billion however other sources are rumoring the situation has worsened since the initial figures were published and that the amount of extra capital required could be as high as 120 billion Euros.

The 12 month Euribor for September for mortgage completions and reviews dropped to 0.87% the lowest ever recorded level with all indications suggesting a further drop in October.

Mortgage pricing has remained stable since the last round of increase in margins which took place late July and early August. Average margins above Euribor being granted are around 3.25%.

There has been no visible relaxing of criteria’s by the Banks and in the medium term this is highly unlikely to happen particularly given that part of the deal for releasing emergency capital includes a change to their overall regulation.

The Bank of Spain requirements on due diligence of mortgage applications remains historically high. Paperwork requirements for “ know your client rules” and the level of evidence a Bank must hold on file to justify lending is extreme even for low loan to values. Mortgages are still being granted but applicants can expect to be requested to supply extensive evidence of affordability including what appears to be various duplication in paperwork requirements.

International Mortgage Solutions
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Average mortgage rate in Spain at 4.32%

Euribor is at a record low

Data out of Spain this week continues to be somewhat gloomy with on the surface little to cheer about on the financial front.

Many banks in Spain announced their half year profits this week and most made large provisions to cover future losses on assets and in order to come into line with new capital ratios enforced by the Bank of Spain.

Average interest rate data showed that average rates in Spain are now 4.32%. This means margins above Euribor are now topping 3% across the residential lending market in Spain.

What is interesting from this data is that whilst during boom times there was a significant difference between the margin above Euribor a Spanish Resident could achieve, in comparison to a Non Resident,  given Non Resident mortgage rates are now averaging 3% to 3.25% above Euribor, and total average rates are 4.32% this discrepancy on residency status has actually all but disappeared.

For many banks who previously saw Non Resident mortgages as more risky and therefore priced them accordingly, the view has changed somewhat.

As Spanish unemployment rises each month and economic data suggest further contraction borrowers from other countries, who are in a more stable economic environment, have become a more attractive proposition for the Spanish banks and are seen as a lower risk.

The mentality shift around Non Resident versus Resident loans is not true of every bank but there is a now a wind of change on how Non Resident applicants are viewed and the current pricing now reflects this change across a number of lenders.

International Mortgage Solutions
www.international-mortgages.org

Rates are reasonable, credit is still available and the sun is shining

This week has seen plenty of news about Spanish banks with little tangible substance or change to the status quo.

Germany has finally approved the 100bn bailout for Spanish banks but there still remain some differences of opinion as to exactly how the funds will be used. Who will require funds will be determined after the more detailed audit due to complete end of August being undertaken by an outside consultancy company. Almost certainly a Bad bank will be created for banks to place their stock in as has happened in Ireland.

Spain itself continues, despite the agreements for the banking system, to suffer in the bond market paying a high price for even 5 year bonds on Thursday.

Bankinter announced half year profits down on previous year but this included the setting aside of money to allow them to meet the 9% core capital ratio required by next year thus suggesting they are in a stronger position than some of their counterparts.

Bad debt ratios for Spanish banks climbed again at end of May, according to this weeks published figures and house prices and overall gross lending also fell.

Spains Banks, in general, say they expect to continue to offer new mortgages throughout this year and do not see the situation worsening. All banks however are giving preference to clients who buy bank owned stock rather than those buying private sales when it comes to the granting of loans.

Despite this 70% loans remain available for the right profile client and the market seems to have flattened out at a general 60% loan to value for private purchase and nonresident applicants. This may change if banks become concerned about further falls in house prices.

Average rates are 4.5% held at this level by the 12 month Euribor rate which is expected to hit a record low next month.

On the bright side, property choice is abundant at present and it is now the case that valuations above purchase prices are being seen on a more regular basis indicating some vendors desire to sell at very realistic prices. Rates are reasonable, credit is still available and the sun is shining.

International Mortgage Solutions
www.international-mortgages.org

Bailout good for banks, not for borrowers

It was announced this week that the final details of the package for Spanish banks will be delayed from the 9^th of July to the 20^th July.

Any misinterpretation by the public that this rescue package would ensure credit started to flow again in Spain was quickly quashed  by bank leaders like the Chief Executive of Sabadell group who stated the banks who require aid, which is most of them, will find it more difficult to lend rather than the other way round.

BBVA Chief Executive also went to press this week stating that BBVA had no intention of reducing the price of the vast assets they hold to sell them through but would in fact hold on to them until prices increased. For BBVA it could be argued this is an option given their size and overall balance sheet strength but for other lenders it will not be. BBVA will find prices drop further because of what other banks have to do so how long they can hold out without being realistic remains to be seen. Brave words that I doubt he will finally be able to stick by.

On the ground mortgages still remain available for purchasers with average rates now 3% to 3.5% above 12 month Euribor with the Euribor dropping slightly again this month from 1.26% to 1.21% for completions in July.

Average rates for those buying bank owned stock are between 1.5% to 2% but often at the cost of negotiated purchase price.

International Mortgage Solutions
www.international-mortgages.org

Mortgage rates increase

Having written last week that despite the Bank bailout request from Spanish Government, and continuing lack of access to money markets for all Spanish Banks that we had not seen any price increases, this week most Banks announced just that.

Sol Bank has added a further 0.90% to their margin and have implemented a high first year premium rate of 4.85%. O the positive side they have maintained their 70% product.

Deutsche Bank has announced there will be pricing increases which will be implemented from the 31^st of July but the details have not yet been issued.

A number of Banks have indicated they are also reviewing their pricing after this week’s downgrade of 28 entities by Moody’s and we expect these to start being implemented shortly.

Whilst the issues in Spain are well reported,  in general across Europe, including the UK, it is widely reported that mortgage rates will rise as all Banks are suffering from a higher cost of funding which eventually has to be passed onto the consumer.

Spain’s rates rises are unlikely to be the increases new borrowers will feel the impact of in July.

International Mortgage Solutions
www.international-mortgages.org

Number of mortgages still falling

The National Statistics Institute has released figures showing the average value of mortgages taken in March decreased 4.3% compared to the same period in 2011. The average value stands at 112,635 euros.

The number of mortgages with changes to conditions decreased 22.8%, while registered mortgage cancellations decreased 20.3%.

Mortgage Statistics  - March 2012

During the month of March, the average amount of mortgage constitutions recorded in the land registries stood at 112,635 euros, a figure 4.3% lower than the same month the previous year and 0.4% higher than that recorded in February 2012.

In the case of mortgages constituted for dwellings, the average amount was 103,782 euros, 7.8% less than in March 2011, and 1.0% less than that registered in February 2012.

The value of the mortgages constituted on urban properties was 4,351 million euros in March, indicating an interannual decrease of 42.5%. In dwellings, the capital loaned exceeded 2,586 million euros, 46.5% less.

Mortgages by institution

Banks were the institutions that granted the largest number of mortgage loans in March (70.2% of the total), followed by Savings Banks (14.1%) and Other financial institutions (15.7%).

Regarding the capital loaned, Banks granted 73.0% of the total, Savings Banks 12.4%, and Other financial institutions 14.6%.

Mortgage interest rates

The average interest rate in March 2012 was 4.37%, indicating a 10.8% increase in the interannual rate, and 0.5% as compared with February 2012.

By institution, the average interest rate of Savings Bank mortgage loans was 4.43%, and the average term was 21 years. Regarding Banks, the average interest rate for mortgage loans was 4.50%, and the average term was 21 years.

94.1% of the mortgages constituted in March used a variable interest rate, as opposed to the 5.9% that used a fixed rate. Within the variables, the Euribor was the reference interest rate most used in constituting mortgages, specifically in 87.0% of new contracts.

Mortgages with registration changes

In March, the total number of mortgages with changes in their conditions recorded in the land registries stood at 25,747, with an interannual decrease of 22.8%. For housing, the number of mortgages with modified conditions decreased 22.4%.

Considering the type of modification of the conditions, in March 21,678 novations (or modifications produced within the same financial institution) were produced, for an interannual decrease of 21.2%. The number of transactions that changed institutions (subrogations creditor) was 2,955, that is 31.7% less. In turn, 1,114 mortgages changed the holder of the mortgaged property (subrogations debtor), which implied an increase of 27.0%.

Number of mortgages with changes in interest rate conditions 

Of the 25,747 mortgages with changes in their conditions recorded in the land registries in March, 39.3% were due to changes in interest rates.

The percentage of mortgages at a fixed interest rate decreased after the change in conditions (from 3.9% to 1.9% of the total), since most of these loans were referenced to a variable interest rate. Within the interest rate structure, the Euribor was the main reference.

The lowest average interest before the change was that corresponding to Active Reference Rate of Savings Banks (3.62%) and after the change was MRTI of Savings Banks (4.13%).

After the modification of conditions, the average interest of the loans decreased 0.3 points in fixed interest rate mortgages, and decreased 0.08 points in variable interest rate mortgages.

Registered mortgage cancellations 

In March, 44,390 mortgage cancellations were registered, 20.3% less than in the same month of 2011. Mortgages cancelled on rustic properties increased 2.8%, whilst those cancelled on urban properties decreased 20.9%. Cancellations of mortgages on dwellings decreased 24.4% in the interannual rate.

Geographical distribution

The highest numbers of mortgaged properties per 100,000 inhabitants¹ was in Castilla y León (148). There is no community that presented a positive variation rate. The greatest negative variation rates was registered in La Rioja (-57.2%).

Principado de Asturias registered the highest average mortgaged amount (154,234 euros), and presented the highest positive variation rates (39.3%).

The Communities showing the highest number of properties with modified conditions in March per 100,000 inhabitants¹ were Comunitat Valenciana and La Rioja (both with 121). Those having the greatest number of registered mortgage cancellations per 100,000 inhabitants¹ were La Rioja (191), and Castilla – La Mancha (156).

¹ This data was calculated from the revision of the figures of the Municipal Register for the year 2011. Only the population aged 18 to 84 years old was considered.

You can download the complete report here: Mortgage Statistics – March 2012

Spanish Mortgage News

Data issued recently confirms the situation on lending in Spain continues to be depressed.

Whilst Spanish Banks were the biggest up takers  of the European Central Banks cheap bonds issued over the last few months this money was predominately used to buy sovereign debt rather than to ease the credit squeeze.

Mortgage lending in Feb 2012 was down 9.4% from the previous month and 47.1% down from the same time the previous year.

Interest rates were up by 17.3% at an average granted rate of 4.54%.

All Banks plan to contract their lending books this year as they struggle to meet new balance sheet and provisioning stipulations introduced by the government.

IMS an independent broker based in Spain says unlike the national data our completions for the year on year February 2011 versus 2012 are up 28%.

Average granted rates were just over 4%.

It is still possible to obtain rates from 3.29% at the lower end subject to loan to values levels and linked products taken.

Heather from IMS said “The Spanish Banks do remain cautious but with the right support, this does not always impact on lending volumes.”

International Mortgage Solutions
www.international-mortgages.org

Average mortgage down 12.5% in February

Figures released by the National Statistics Institute (INE) show a drop in the average value of mortgages in Spain in February with a decrease of 12.5%, compared to the same period in 2011.

However, there was an increase of 4.8% in the number of existing mortgages that changed conditions, while the number of cancelled mortgages decreased 12.7%.

During the month of February, the average amount of mortgage constitutions recorded in the land registries stood at 112,179 euros, a figure 12.5% lower than the same month the previous year and 8.8% lower than that recorded in January 2012.

In the case of mortgages constituted for dwellings, the average amount was 104,868 euros, 14.6% less than in February 2011, and 2.2% less than that registered in January 2012.

The value of the mortgages constituted on urban properties was 4,615 million euros in February, indicating an interannual decrease of 50.1%. In dwellings, the capital loaned exceeded 2,770 million euros, 54.8% less.

Mortgages by institution  

Banks were the institutions that granted the largest number of mortgage loans in February (66.0% of the total), followed by Savings Banks (16.7%) and Other financial institutions (17.3%).

Regarding the capital loaned, Banks granted 66.3% of the total, Savings Banks 17.5%, and other financial institutions 16.2%.

Mortgage interest rates

The average interest rate in February 2012 was 4.35%, indicating a 17.3% increase in the interannual rate, and a decrease of 1.6% as compared with January 2012.

By institution, the average interest rate of Savings Bank mortgage loans was 4.23%, and the average term was 23 years. Regarding Banks, the average interest rate for mortgage loans was 4.54%, and the average term was 21 years.

94.2% of the mortgages constituted in February used a variable interest rate, as opposed to the 5.8% that used a fixed rate. Within the variables, the Euribor was the reference interest rate most used in constituting mortgages, specifically in 86.5% of new contracts.

Mortgages with registration changes

In February, the total number of mortgages with changes in their conditions recorded in the land registries stood at 32,588, with an interannual increase of 4.8%. For housing, the number of mortgages with modified conditions decreased 6.9%.

Considering the type of modification of the conditions, in February 26,428 novations (or modifications produced within the same financial institution) were produced, for an interannual increase of 2.8%. The number of transactions that changed institutions (subrogations creditor) was 4,516, that is 20.8% more. In turn, 1,644 mortgages changed the holder of the mortgaged property (subrogations debtor), which implied an increase of 0.7%.

Number of mortgages with changes in interest rate conditions 

Of the 32,588 mortgages with changes in their conditions recorded in the land registries in February, 24.9% were due to changes in interest rates.

The percentage of mortgages at a fixed interest rate decreased after the change in conditions (from 9.3% to 4.1% of the total), since most of these loans were referenced to a variable interest rate. Within the interest rate structure, the Euribor was the main reference. The lowest average interest before the change was that corresponding to MRTI of Banks (4.44%) and after the change was Other Interest rates (3.72%).

After the modification of conditions, the average interest of the loans decreased 0.97 points in fixed interest rate mortgages, and decreased 0.71 points in variable interest rate mortgages.

Registered mortgage cancellations 

In February, 40,658 mortgage cancellations were registered, 12.7% less than in the same month of 2011. Mortgages cancelled on rustic properties increased 9.6%, whilst those cancelled on urban properties decreased 13.4%. Cancellations of mortgages on dwellings decreased 16.6% in the interannual rate.

Geographical distribution

The highest numbers of mortgaged properties per 100,000 inhabitants¹ was in Illes Balears (169). There is no community that presented a positive variation rate. The greatest negative variation rates was registered in La Rioja (-70.8%).

Pais Vasco registered the highest average mortgaged amount (169,482). The Autonomous Community presenting the highest positive variation rates was Cantabria (26.4%).

The Communities showing the highest number of properties with modified conditions in February per 100,000 inhabitants¹ were Comunitat Valenciana (156) and Castilla-La Mancha (132). Those having the greatest number of registered mortgage cancellations per 100,000 inhabitants¹ were La Rioja (184), and Comunitat Valenciana (156).

¹ This data was calculated from the revision of the figures of the Municipal Register for the year 2011. Only the population aged 18 to 84 years old was considered.

You can read the full press release here: Mortgage Statistics - February 2012

Spanish Mortgage Update – April 2012

The early months of 2012 has seen little by way of good news on both the purchase and mortgage side in Spain.

For the second quarter margins above Euribor which have seen increases across the board early in the New Year do at least seem to have stabilized. No Bank has increased its margins since the cheap ECB funds were made available. Euribor itself has dropped to 1.49% for April making average overall rates in the region of 4.5%.

Mortgages are still available and for some Banks their focus is now on the nonresident market as for the first time in history non residents are seen as a lower risk than residents.

Under pressure from the Government and following changes in legislation Banks are now being forced to more accurately assess the value of stock on their balance sheet and we have started to see much more realistic pricing of Bank stock.

Most Banks have stated over the last few days that they have budgeted to sell double the number of properties in 2012 in comparison to 2011 and discounts and special mortgage terms will reflect this. Whilst this may not be good news for private sellers as the Bank are the agent and the supplier of the funds, recovery will only happen fully when the Banks have shed their surplus stock.

Whilst possibly painful this process must take place before both the mortgage market and the property market can start to move forward.

Buyers considering buying bank stock with a mortgage from the Bank should always ensure they still obtain independent advice for both finance and legalities buying from a Bank does not mean you can assume everything is in order.

International Mortgage Solutions
www.international-mortgages.org