The challenges facing the Spanish Mortgage Market at present are two fold.
On one hand lending volume is considerably down even on last year with most banks missing their overall lending targets for this year by quite some way.
Heather Chambers of International Mortgage Solutions SL in Spain said, in March this year the official published statistic’s for the Andalucia area showed only 224 new mortgages completed in the whole region, and that areas like Alicante, Valencia faired little better.
Whilst Spanish Banks are not aggressively lending, these kinds of figures are well below what the banks had anticipated and will cause them problems if the trend continues throughout the year.
On the other side, cost of funding for the Spanish banks has risen considerably making lending in isolation less profitable and in some cases not profitable at all. Despite this, to attract new clients and cross sell other profitable products the banks need new mortgage applications and all bar two have now made taking life cover with these compulsory to granting the loan immaterial of whether this cover is actually required by the client as a reflection of their requirement to link loans to more profitable activities.
Pricing has risen considerably. Three to four years ago a non resident would expect to pay 1% to 1.25% above 12 month Euribor rate, these days the lowest is 1.25% with the highest being a whopping great 3.89% which is what Santander are charging for a 50% loan. The average margin one can expect is between 1.5% to 2%. This reflects the cost of funds the banks now have.
Loan to values have dropped, only one bank Sol Bank still provides up to 70% and Barclays will consider up to 65% but all other lenders will now only lend up to 60% for non residents. The other key change is of valuation purchase price and the lower of the two instead of being linked solely to valuation.
Self build loans have all but disappeared with very few lenders offering this type of facility.
Equity release outside money for improvements to property itself or for purchase of another property in Spain is a complete no, no.
Re-mortgaging is costly to undertake and rarely provides any benefit for the client. The two banks Barclays and Lloyds who used to support cost of the move have now either withdrawn that support or in case of Lloyds priced the product so highly, subrogation rules cannot be met.
Heather Chambers owner of International Mortgage Solutions who have operated in Spain for 10 years states on a more positive note loans are still being granted. In general most applicants have a level of realism about what they require and are more cautious themselves about over committing. General service levels with most banks have improved and the banks are more customer focussed wishing to provide a more holistic service to non resident clients and build long term relationships.
Loans up to 100% with very good terms can be found on bank owned stock and in these instances in particular the banks are far more flexible.
Understanding however the psyche of the lenders and professional packaging of an application along with ensuring transparent and quality information, is provided to the client, has become more important. This has ensured less experienced mortgage brokers have found it difficult to survive and clients who approach banks direct often experience issues because they except the mortgage process and Spanish Banks to behave exactly the way it does in the UK.
Video: Heather explains the differences between UK mortgages and Spanish mortgages:
Press note:
Heather Chambers is available to comment on this article and all aspects of the Spanish mortgage market. Please use the following email address:
heather@imsmortgages.com
More Spanish mortgage articles:
How the Spanish Mortgage Market has changed second half of 2011
