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
www.international-mortgages.org

Average mortgage value down 7.2% in May

Average mortgage value down 7.2%

The National Institute of Statistics has released figures showing a fall of 7.2% in the average value of mortgages constituted in May, compared to the same time in 2011.

The average mortgage value in May was 112,320€, a figure 7.2% lower than the same month the previous year and 1.8% lower than that recorded in April 2012.

In the case of mortgages constituted for dwellings, the average amount was 101,168 euros, 7.5% less than in May 2011, and 1.5% higher than that registered in April 2012.

The value of the mortgages constituted on urban properties was 4,550 million euros in May, indicating an interannual decrease of 33.5%. In dwellings, the capital loaned exceeded 2,631 million euros, 35.8% less.

Mortgages by institution

Banks were the institutions that granted the largest number of mortgage loans in May (73.8% of the total), followed by Savings Banks (10.2%) and Other financial institutions (16.0%).

Regarding the capital loaned, Banks granted 71.5% of the total, Savings Banks 10.8%, and Other financial institutions 17.7%.

Mortgage interest rates

The average interest rate in May 2012 was 4.32%, indicating a 5.9% increase in the interannual rate, and a 1.4% decrease as compared with April 2012.

By institution, the average interest rate of Savings Bank mortgage loans was 4.36%, and the average term was 23 years. Regarding Banks, the average interest rate for mortgage loans was 4.47%, and the average term was 20 years.

94.4% of the mortgages constituted in May used a variable interest rate, as opposed to the 5.6% that used a fixed rate. Within the variables, the Euribor was the reference interest rate most used in constituting mortgages, specifically in 85.3% of new contracts.

Mortgages with registration changes

In May, the total number of mortgages with changes in their conditions recorded in the land registries stood at 32,819, with an interannual increase of 5.8%. For housing, the number of mortgages with modified conditions increased 7.8%.

Considering the type of modification of the conditions, in May 28,158 novations (or modifications produced within the same financial institution) were produced, for an interannual increase of 8.0%. The number of transactions that changed institutions (subrogations creditor) was 3,331, that is 4.1% less, as compared with May 2011. In turn, 1,330 mortgages changed the holder of the mortgaged property (subrogations debtor), which implied an interannual decrease of 10.6%.

Number of mortgages with changes in interest rate conditions

Of the 32,819 mortgages with changes in their conditions recorded in the land registries in May, 37.3% were due to changes in interest rates.

The percentage of mortgages at a fixed interest rate decreased after the change in conditions (from 3.3% to 2.3% 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 and after the change was that corresponding to Other interest rates.

After the modification of conditions, the average interest of the loans increased 1.09 points in fixed interest rate mortgages, and decreased 0.16 points in variable interest rate mortgages.

Registered mortgage cancellations

In May, 39,788 mortgage cancellations were registered, 9.1% less than in the same month of 2011. Mortgages cancelled on rustic properties decreased 11.5%, whilst those cancelled on urban properties decreased 9.0%. Cancellations of mortgages on dwellings decreased 10.1% in the interannual rate.

Download complete report from INE: Mortgage Statistics – May 2012

Mortgage borrowing falls in April

Fewer mortgages granted in April

Following falling property sales the number of new mortgages approved in April fell by 7.5% compared to the same month in 2011.

A total of 977.061 million euros of new mortgage loans were approved compared to 1.056.325 million euros in April of the previous year.

The Spanish Mortgage Association released the figures which confirm April as a slow month with property transfers also falling 5.7%.

The month closed with the total mortgage balance down on the previous month by 8.780 million euros, 20.000 million euros less than in February. The year-on-year balance dropped by 73.264 million euros, putting the total balance at 966.514 million euros which  includes a figure of 176.058 million euros in securitised mortgage assets.

Banks and savings banks accounted for 887.416 million euros of the total while credit unions recorded 65.409 million euros representing a 4.95% fall for them. However, it wasn’t bad news for all with credit institutions accounting for 13.689 million euros representing a massive year-on-year growth of 35%.

The figures show with some clarity the continued slowdown of the country’s real-estate sector which has been suffering since the property bubble burst in 2007, when property prices were at their peak and property sales figures also hit record levels.

You can see the report here: Mortgage Credit Activity April 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

Mortgage Statistics – January 2012

According to figures released by The National Statistics Institute (INE), during the month of January, the average value of the mortgage constitutions recorded in the land registries stood at 122,973 euros, a 5.0% increase compared to the same month in 2011, and 10.6% higher than that recorded in December 2011.

In the case of mortgages constituted for dwellings, the average value was 107,217  euros, 9.7% less than in January 2011, and 3.2% higher than that registered in December  2011.

The value of the mortgages constituted on urban properties stood at 5,308 million euros in January, indicating an interannual decrease of 35.3%. In dwellings, the capital loaned  exceeded 3,127 million euros, 46.9% less.

Mortgages by institution

Banks were the institutions that granted the highest number of mortgage loans in January (64.7% of the total), followed by Savings Banks (18.9%) and Other financial institutions  (16.4%).

Regarding the capital loaned, Banks granted 67.6% of the total, Savings Banks 18.2%, and Other financial institutions 14.2%.

Mortgage interest rates

The average interest rate in January 2012 was 4.42%, indicating a 19.1% increase in the interannual rate, and an increase of 1.6%, as compared with December 2011.

By institution, the average interest rate of Savings Bank mortgage loans was 4.37%, and the average term was 23 years. Regarding Banks, the average interest rate for mortgage loans was 4.55%, and the average term was 21 years.

92.8% of the mortgages constituted in January used a variable interest rate, as opposed to the 7.2% that used a fixed rate. Within the variable rates, the Euribor was the reference interest rate most used in constituting mortgages, specifically in 87.8% of new contracts.

Mortgages with registration changes

In January, the total number of mortgages with changes in their conditions recorded in the land registries stood at 30,571, with an interannual decrease of 6.6%. In the case of dwellings, the number of mortgages with modified conditions decreased 9.0%.

Considering the type of modification to conditions, in January, 25,409 novations (or modifications produced within the same financial institution) took place, for an interannual decrease of 2.6%. The number of transactions that changed institutions (subrogations creditor) was 3,487, 28.2% less. In turn, 1,675 mortgages changed the holder of the mortgaged property (subrogations debtor), which implied a decrease of 6.2%.

Number of mortgages with changes in interest rate conditions

Of the 30,571 mortgages with changes in their conditions recorded in the land registries in January, 40.6% were due to changes in interest rates.

The percentage of mortgages at a fixed interest rate decreased after the change in conditions (from 4.1% to 2.7% 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 Other interest rates (3.90%). The lowest average interest after the change was that corresponding to the Euribor (4.36%).

After the modification to conditions, the average interest of the loans decreased 0.19 points in fixed interest rate mortgages, and decreased 0.10 points in variable interest rate mortgages.

Registered mortgage cancellations

In January, 40,515 mortgage cancellations were registered, 7.5% less than in the same month of 2011. Mortgages cancelled on rustic properties increased 11.4%, and those cancelled on urban properties dropped 8.1%. Registered cancellations of mortgages on dwellings decreased 9.9% in the interannual rate.

Geographical distribution

The highest number of mortgaged properties per 100,000 inhabitants was recorded in La Rioja (224). There is no community that presented a positive variation rate. The greatest negative variation rates were registered in Aragon (-61.0%) and Galicia (–49.2%).

Comunidad de Madrid registered the highest average amount mortgaged (169,892 euros). Andalucia presented the highest positive interannual variation rate (30.0%).

The Communities showing the highest numbers of properties with modified conditions per 100,000 inhabitants were Castilla-La Mancha (145) and Comunitat Valenciana (134). Those having the greatest number of registered mortgage cancellations per 100,000 inhabitants were La Rioja (320) and Cantabria (162).

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

New guidelines to protect home-owners

Eviction protests are frequent

On Friday the Spanish government approved a new voluntary “code of conduct” for banks with the aim of helping poorer home-owners to settle debts and stay in their homes.

The economic crisis has caused a huge increase in the number of evictions which has reached “crisis point”.

The new guidelines will mean defaulting owners can now hand back the property to the lender as a way of cancelling the debt. Mortgage conditions can also be modified for a period of up to 40 years.

Under current rules a bank can repossess a home if the mortgage payments are not up to date and they often demand further payments from the owner if the value of the property has fallen below the amount borrowed. Other “administration” fees are also often added to the debt.

The new guidelines will not protect every home-owner, deputy prime minister Soraya Saenz de Santamaria explained. The rules will apply where all members of a household are unemployed or when the mortgage repayments are equal to, or more than, 60% of the total household income.

“We have adopted these measures in parliament to ease the dramatic situation of many Spaniards, who have lost everything, who have lost their job,” she said in a press conference following the approval of the guidelines.

“Many families, more than one and a half million, have all of their members out of work. These are families that have no revenue and, given their inability to pay their mortgage, are facing eviction.”

Since the property bubble collapsed in 2008 there have been over 300,000 registered evictions, Sra. de Santamaria said.

With the unemployment rate at 23%, one of the highest in Europe, and the governments austerity measures, introduced over last month, many people are continuing to struggle and many are facing the prospect of eviction. However, with so many people in the same boat Spanish solidarity is spreading across the country.

Many times over the last months crowds have gathered where properties are due to be seized, to prevent court clerks and bank officials from gaining access to the property and evicting residents.

The Platform for Mortgage Victims, an association set up to help defaulting owners by staging the protests, says it has prevented or postponed 156 evictions in Spain since it was set up in 2009.

Economy Minister Luis de Guindos announced his plans for new guidelines last month in parliament.

“This situation is a human tragedy. The government is very sensitive to the situation created by the large number of evictions which are affecting a large number of citizens,” he said.

Good news for UK mortgage applicants

Finally, some good news for UK mortgage applicants has come from the Spanish banks.

BBVA, from their London network, have just launched and are now marketing a new 65% loan for purchases in Spain.

The product offers a choice between linking to the 3 month Euribor or Bank of England Base rate in either Euros or Sterling.

Covered under UK law, whilst secured against the Spanish property, the product has the benefit of competitive rates, second highest loan to value available in Spain, zero early repayment penalties and no compulsory life cover linked.

Minimum loan size is Euros 100k or GBP 83k.

BBVA is also offering a 50% equity release product for general purpose. With all other banks only offering this facility for home improvements or purchase of another property in Spain this is a real bonus for clients looking to raise money against a Spanish property to take funds out of Spain.

International Mortgage Solutions
www.international-mortgages.org

Record drop in mortgages in 2011

According to new figures from the Spanish Mortgage Association (Asociación Hipotecaria Española, AHE) the number of mortgages from Spanish banks fell 6% in 2011, the largest drop ever recorded.

At year end the mortgage balance stood at 1,009,656 million euros, the report shows.

In absolute terms, the net decline in mortgage lending was 67.271 million. In December alone it shrank by over 8 million euros, representing a decrease of 0.5% over the previous month. The data confirms the contraction suffered in Spain for the last four years. This is in contrast with growth exceeding 20% experienced during the peak of the housing boom.

By December, 543,766,000 euros in mortgages had been approved by savings banks, 6.54% less than a year earlier. For banks, the balance stood at 374,491,000, a 5.69% decrease from December 2010. Meanwhile, credit unions granted 67.058 million in loans, 4.87% less than the same period last year, while credit institutions account for 13.807 million euros, 36.02% more than in 2010.

With regard to new borrowing there has been a collapse in loans for private and corporate borrowers. According to the Bank of Spain the form of credit that suffered the most was families borrowing for property purchases. During 2011 banks granted 37.525 million euros in mortgages, a figure that is 46% lower than the year before when they loaned nearly 70,000 million.

The association suggests that the downward trend is likely to continue over the coming months, at least during the first half of this year.

In December the AHE predicted that the “turbulent” economic environment in Spain, and internationally, provides an “uncertain future”. However, a broad improvement in credit in the real-estate business is expected by the AHE.

The credit crunch became more severe in 2011, and when the crisis deepened it resulted in difficulties in obtaining finance. It is these circumstances that have reduced the overall balance of the mortgage portfolio which has reduced by 5.7%.

With the crisis continuing the market looks uncertain. On one hand falling house prices and interest rates are likely to increase the number of mortgages, while on the other hand economic pressure and rising unemployment could reduce borrowing.

Mariano Rajoy’s recently elected government has already approved financial reforms in an attempt to “clean up” the banks balance sheets and reduce their exposure to bad loans.