More Mortgages Written in January

Despite the number of property sales falling slightly at the start of the year, when compared to last year, the number of new mortgages written in Spain increased in January by over 10% with 23,275 new mortgages recorded.

Also on the increase is the average amount of the mortgages written which increased by 14.2% compared to January 2015, to stand at 133,461 Euros.

The total value of mortgages written on urban properties amounted to 4,229.4 million Euros, representing a 16.3% increase over the previous year. Of those, the amount borrowed against residential property increased by 10.8% to 2,459.7 million Euros. Mortgages on residential properties accounted for 55.3% of capital borrowed in January.

Interest Rates

The majority of new mortgages written in January (89.8%) were variable rate mortgages, compared to only 10.2% on a fixed rate. In 94% of cases interest was based on the Euribor rate which has been consistently low in recent months.

The average rate of interest applied to new mortgages in January was 3.21% with the average term being 22 years. On residential property the average rate was 3.27%, representing a slight fall of 0.4% compared to January 2015.

By Community

Andalucia, Madrid and Catalonia registered the highest amount of new mortgages with 4,684, 3,976 and 3,857 new mortgages, respectively.

By growth, the winning communities were Castilla-La-Mancha which saw a 30.4% increase, followed by Madrid with 22.9% more mortgages and Andalucia with 22.2% more than in January last year.

When comparing communities based on the total amount of borrowed capital Madrid easily dominates with 576.9 million euros lent out during January. Catalonia followed with 457.2 million and Andalucia with 411.8 million Euros.

The largest monthly variation recorded, when compared to the previous month (Dec 2015), was Castilla y León which saw an increase of 53%, while the number of mortgages written in Castilla-La Mancha increased 43.6%.

The only two communities that recorded a fall in the number of mortgages written were Cantabria (-10.9%) and Galicia (-8.0%).

Read the full report here: INE (in Spanish).


Property Foreclosures Fell in 2015

Home repossessions fell 13% in 2015
Home repossessions fell 13% in 2015

Following the financial crisis many Spanish mortgage holders defaulted on their mortgage and found their properties being repossessed.

The number of repossessions has since fallen as the market levelled out and 2015 showed a continuation of this trend.

In total, 2015 saw the commencement of foreclosure proceedings on 30,334 primary residences which represents a 13% fall when compared to the previous year, according to data released by the National Statistics Institute.

Q4 – 2015

When looking at the fourth quarter of 2015 the total number of foreclosures registered was 22,540, representing a fall of 16.2% over the previous quarter. This also shows a 27.8% fall when compared to Q4, 2014.

Regular homes accounted for 76.8% of those foreclosures, a huge 23% fewer than in the same period in the previous year. Meanwhile, 2,080 foreclosures were on “second” homes, meaning that the property was not the primary residence of the owner.

Out of all the registered properties in Spain (18,395,100) this suggests a very small proportion, only 0.037%, were affected by foreclosures.

The total number of foreclosures initiated during Q4, 2015, consisted of 14.7% new properties, while the remaining 85.3% represents resale properties. These figures represent falls of 29.1% and 28.1%, respectively.

Many, in fact over half (56%), of the foreclosures are on homes which were mortgaged between 2005 and 2008. 18.5% were mortgaged during 2007, which as we all know is when the market collapsed.

By Community

Andalucia was the community with the highest number of foreclosures registering 5,723 certificates. Valencia followed with 4,011 with Catalonia coming a close third with 3,475. At the other end of the scale, Navarra recorded the fewest foreclosures with only 112 certificates registered, while the Basque Country and La Rioja also showed low figures with 137 and 176, respectively.

When looking at primary residences, Andalucia recorded 3,376 foreclosures with Catalonia and Valencia registering over a third fewer with 2,313 and 2,290, respectively.

Year End – 2015

When looking at the figures for the full year the total number of foreclosure registrations was 101,820 which represents a 15.5% fall when compared to 2014.

Of the total, 30,334 foreclosures were recorded on homes (77.9%). This represents a 13% reduction compared to the previous year. Non-primary residence foreclosures also fell ending the year at 8,609, a fall of 14.4%.

NB: The data provided herein is based on the registration of a certificate of foreclosure but this does not always lead to an eviction/repossession. Legal proceedings and other agreements can change the course of the process.


2015 Saw Large Increase in Mortgage Lending

As buyer confidence increases in the Spanish property market, so too does the confidence of banks to lend, although they are still a way off the amounts loaned in 2011 which was followed by two years of decline. In 2014 we saw a slight increase in lending.

In 2015 the total number of mortgages approved for homes was 244,827, a massive increase of 19.8% over 2014. The total number of approved mortgages was 369,588. When looking at the types of properties being mortgaged there is an increase in numbers across the board:

  • 18,566 Rustic Properties (4.7% increase)
  • 351,022 Urban Properties (17.9% increase)
  • 244,827 Dwellings (19.8% increase)

Following a few tumultuous years in the mortgage world it seems the banks have now normalised their reserves and are once again ready to lend although the average amount mortgaged has dropped slightly sitting at €129,214 (-0.8%).

In general, the total amount loaned throughout 2014 increased by 16.2% to a massive 47,756 million Euros.

New mortgages 2015

By Region

As mentioned in a previous article, Spanish property sales are on the up and this is reflected in the number of new mortgages with the same regions topping the charts.

Andalucia saw the most new mortgage approvals in 2015 registering 45,971 of the total, an increase of 20.4%. Madrid and Cataluña followed close behind with 42,382 (19.6% increase) and 38,583 (25.9% increase), respectively.

In terms of percentage increase, the Balearic Islands topped the list with a massive 41.4% increase in mortgage approvals despite only 8,300 new loans.

The only autonomous region to record a drop was the tiny Spanish enclave of Ceuta on Africas North coast, registering -11.6%.


Does a Zero Rate Euribor Affect Your Mortgage?

What mortgage should I get with a negative Euribor?

The Euribor has reached zero and continues its downward path, an unusual scenario which causes troubles to banks in an inauspicious time for retail businesses. The variable rate mortgage, with a calculation formula stipulated by adding a spread to Euribor, will experience a surprise in the coming months: the applicable Euribor may have a minus sign in front of it.

What effect would this have on fees? A charge for being mortgaged, a reduction in the monthly payment or no effect at all? If the absolute value of Frozen Euribor overtakes the differential one, the applicable interest rate would be negative, implying getting money for having borrowed, according to the opinion of some. After all, there are banks that pay other financial entities to lend money, and this paradox makes the Euribor and other market interest rates very cold. But the banks have already made clear that to “pay for borrowing” is “contradictory” and that, in any case, the courts are the ones to decide.

Although it might happen that financial institutions have to pay the mortgagor, only a few customers could experience the happiness of actually receiving money. Customers who took Deutsche Bank mortgages, to a spread of 0.17%, or Bankinter, with its extinct Euribor offer of +0.18%, are the type of borrower who might experience the effect of negative rates. Those with ordinary mortgages may opt for a reduced share, with interest below the agreed differential. The effect would be invalid if the writing of a mortgage establishes a floor clause, which immunizes the monthly fee from negative rates. In these cases, consulting a lawyer to analyze if a lawsuit against the bank is viable is a good thing to do.

What if I’m thinking about asking for a mortgage?

The yield curve that benefits many mortgagors may hurt new applicants. 2016 is going to be the year of real estate, but it is going to takeoff gradually. Banks want to attract creditworthy customers and compete in the mortgage market, but this effect may be mitigated if the negative rates scenario continues.

In the first place, the reduction of spreads has stopped, according to data handled by the financial portal, Euribor + 1 was the one to beat this year, but banks have frozen the lower rate offers. It is not plausible to see lower spread mortgages until the Euribor value rises again, even if only slightly. This is a bad panorama for those who had planned to finance their home when mortgages were cheaper.

In addition, to wait for a rebirth of floor clauses is not unreasonable. The floor clauses are not illegal; what does not comply with the rules is to hide its effects on the calculation of the monthly installments from clients. A “zero clause” agreement has been established which means that the mortgage interest will never descend below zero. It could be only a matter of time before some banks take the leap to provide limitations on the descent of moderate interest rates, not much above 1%.

Banco Santander has innovated and may set a trend: it states that the rate is fixed for the first two years, namely 1.75% nominal. Two years is not a term that seeks to benefit the customer who pays fixed fees, but to protect the bank from a negative Euribor during this time.

But not everything is bad news for those who want to get a mortgage this year: there are several banks offering mortgages with fixed or mixed stable rates below 3% or even 2% depending on the bank and the client. 1.75% for two years is a bad choice; but a safe 2% for ten or more years is an option to take into account. In the mortgage North Pole, those who know how to wrap up with the training and information coat, will arrive safely at their destination: just paying a fair amount for the money borrowed.


N.B. This article is for information only and should not be treated as financial advice.

Property in Spain Costs Less than other areas of the EU

BUYING a place Spain is cheaper than elsewhere within the EU.

As published by the annual analysis on Spain’s real estate market conducted by Deloitte, the proportion of finance spent by households on mortgage payments – rate of effort – has been constantly falling in recent years and it now stands at thirty three per cent, as a consequence of the decline in house costs registered since the start of the recession.

Moreover, the typical home value in Spain is 4.4 times the individual gross wage, compared to most other countries within the European Economic Community where the value is on average 6.1 times the individual gross wage and United Kingdom and France, whereby the amount is 8.5 and 7.9 times the individual average earnings.

For the fourth year and compared to the remainder of the country, property owners in Barcelona and Guipuzcoa have had to pay a bigger proportion of their earnings on mortgage payments, given the high value of housing in those provinces.

In contrast, purchasing properties in La Rioja, Lleida and Pontevedra is more accessible, since the speed of effort is less than thirty per cent.

Is a Spanish mortgage a better option?

Having made a decision where you want to call home and also which property to purchase, the following step of purchasing a home is usually how to find the funds to pay for it. For everybody apart from the wealthy, this will likely entail obtaining a mortgage.

It may be worth arranging the mortgage before deciding on a property

Qualification requirements in Spain depend on your own personal capacity to pay back the money you borrow, and could well be stricter compared to your own country. Typically, your overall regular monthly expenses such as repayments must not surpass 35% of the net income. Loan providers may take into account some types of earnings outside your income, for example that from rentals and other investments, however usually in Spain they don’t always take these in to account.

Should you obtain a mortgage from a Spanish loan provider, or perhaps from back home? Benefits of obtaining a mortgage in Spain consist of reasonably low interest payments, much less management complexity and, if you want to rent your home, maintaining all funds in Euros. Nevertheless, looking at Spain’s present financial situation, it might be hard to get a good option.

In addition, mortgage loan products like buy to let and well-known features like reduced fees and penalties with regard to earlier repayment might not be offered. Several non-resident mortgage loans are inelastic and out-of-date and don’t provide the overall flexibility a lot of consumers would like. Additionally, the standard mañana culture may result in lengthy administration times so its worth lookihng in to arranging the mortgage before the search for the property.

This example is slowly improving. Several lending institutions now have awakened to the fact that there are rewards available from the large numbers of non-residents purchasing holiday homes, and now have set up non-resident divisions that will look on foreign loan provider expectations far more sympathetically.

It could take quite a while to get the mortgage you would like – more time if you are not fluent in the local language. Spanish loan companies tend to opt for your main income source to be a regular salary, and could overlook less regular income sources like dividends and also self-employment. Acquiring a mortgage broker could help to ameliorate these kinds of issues.

Mortgage types:-

The repayment mortgage is considered the most typical type in Spain. It’s conditions depend upon whether or not you qualify as a Spanish resident or not. Should you have held a Spanish residence card or perhaps a certificate, and have been paying taxes in Spain for two years or maybe more, you could be entitled to a Spanish Resident mortgage. It has the best loan-to-value ratio (LTV), and also the most favourable rate of interest, which in Spain is linked to the European standard borrowing rate, known as the Euribor.

Click link here to calculate your mortgage  – Mortgage calculator

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 31st Dec deadline.

International Mortgage Solutions

Mortgage and finance update

IMS - International Mortgage SolutionsThis 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

Average mortgage rate in Spain at 4.32%

Euribor is at a record low
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

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

IMS - International Mortgage SolutionsThis 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