Number of mortgages fall in Spain

Number of mortgages in Spain fall by 8% in 2007

Despite the slowdown in the Spanish housing market the value of an average mortgage for a house or flat in Spain went up last year to 149,007 euros. This is 6.2% more than the average for 2006 in which mortgages increased by 12.6%. However, the total number of mortgages taken out for the purpose of buying a home went down by 7.97% to 1,235,212 following a sharp fall of 23.41% registered in December 2007.

A similar situation occurred with regards to the sale of property for commercial or rural use. The average capital needed to purchase land or property rose by 7% to 168,677. However, there were less mortgages of this type taken out with respect to the previous year with a drop of 5.1% compared to 2006 at 1,768,198 estates sold.

Looking at statistics for the last quarter of 2007 the drop in property sales becomes even more evident as well as a drop of 2.2% in the average price of a mortgage compared to November 2007 which shows an accumulated decrease of 5%.
However, the cost of mortgages kept going up with some monthly payments going up by as much as 118.05 euros according to figures from the Spanish National Institute for Statistics published yesterday.

Comparing the average number of years a mortgage is taken out, the type of interest paid and the average price of a mortgage it appears that monthly payments in 2007 were situated at 825.63 euros compared to 707.58 euros for 2006 which works out at 13.52% more.

Savings banks (cajas de ahorros) conceded the most number of mortgages in 2007 at 59.2% followed by banks which conceded up to 31.7% - other financial institutions were responsible for 9.1%.

As far as the amount conceded, savings banks conceded up to 57.2% of the total followed by banks which conceded up to 35.1%. The average interest charged on a mortgage was 4.71% and the average length was 26 years, one more than in 2006.

According to the latest information 98% of mortgages used variable rates compared to just 2% that used a fixed rate and the euribor was the most common rate used with 87%of mortgages using this interest rate as their reference.

The number of mortgages that changed their conditions rose by 26.2% in December last year while cancellations dropped by 10.1%.

The cost of changing or cancelling a mortgage in Spain to drop sharply

The cost of cancelling a mortgage with a Spanish bank is to drop by 80%

The Economic and Finance Commission for the Senate is expected to pass the law on reforming the mortgage market so that this proposed legislation can be sent directly to congress. If the law is passed it will reduce the cost of modifying the conditions of a mortgage by up to 80%. It won’t have to go to the upper chamber again given that it has already been passed by the commission.

The measure has the support of all parliamentary groups except for IU-ICV. It is intended to reduce the costs of modifying the conditions of a mortgage by 80% as it will no longer be necessary to undersign a new mortgage therefore reducing considerably notary, registration and tax costs. The legislation will also affect ‘reverse mortgages’.

Mortgage cancellation costs: The cost of cancelling a mortgage will go down from 1% to 0.25%. This means that the cost of cancelling an average mortgage of 150,000 euros at 27 years will go down from 1500 euros to 375 euros.

Mortgage substitution costs: If you change your mortgage from a fixed or mixed to a variable interest rate the cost will remain the same at 0.25% except for when interest rates are below those at which the mortgage was taken out.
Notary costs: Going to a notary will now only cost 30 euros in contrast to the current costs which are calculated against the value of your assets with a minimum cost of 90 euros.

Registration Duties: The discount of 90% which currently only applies to substituting or renewing of a mortgage that is going from a variable to a fixed rate will apply to all mortgages. Therefore according to this the cost of cancelling an average mortgage will be reduced from 300 euros to 52.2 euros.

Registration Costs: These will be reduced from 111 euros to 25 euros.

Reverse Mortgages: These will be exempt from tax for legal and documentation costs and also notary duties will be reduced. Those people who have reverse mortgages can get a tax exemption of up to 10,000 euros when they make their tax declaration if the money from their reverse mortgage is going to be paid into a pension plan.

Related: Mortgages in Spain # Mortgages for non-residents in Spain

Real Estate slow down in Spain puts Spanish savings banks at risk

American Agency Moody’s detects 5 Spanish savings banks at risk.

Financial analysts at Moody’s believe, like the Spanish government, that property prices in Spain will continue to rise slowly. However, the agency doesn’t rule out other possibilities such as a slight drop in prices in the Spanish property market. It believes that if this situation arises then Spanish banks, above all regional building societies which have lent a lot of money to construction firms, will be hit the hardest.

The American agency thinks that banks and savings banks are more at risk from construction firms defaulting on their payments than families who can’t pay their mortgages. With regards to those who fall behind on their rent the European Association of Arbitration has pointed out that if this occurs then it is almost always during the first few months of the rental contract being signed. Although, the most pessimistic forecast of a property crash occurring in Spain has been ruled out for now, a lot depends on macroeconomics and the healthy evolution of the world economy.

While the number of individuals and families who can’t keep up their mortgage repayments is still very low in Spain, the percentage of mortgage defaulters has been rising steadily. While in March it was just 0.462% this rose to 0.506% in June. This could be a cause for concern for savings banks who have granted loans to construction companies, given that the figure was under 0.3% just two and a half years ago. Moody's has identified 5 Spanish savings banks particularly at risk, although it has declined to name them.

Related: Spanish banks # Spanish savings banks # Ranking of Spanish banks

Reverse mortgages in Spain getting more popular

The "reverse mortgage" in Spain is based on a simple idea aimed at helping those over 65 years old who own their own house or flat but find it difficult to make ends meet at the end of the month. With a ‘reverse mortgage’ they can receive payments from the bank monthly over a limited length of time or a one off payment and continue to live in their own homes for the rest of their days.

Although this financial product has been available for five years, it has only been over the last two years that it has really taken off. Furthermore, the new law governing mortgages which is due to come into effect in the autumn could act as an incentive for more banks to offer ‘reverse mortgages’.

Up to now only around a dozen of the big building societies and banks offered reverse mortgages. However, according to a survey published in El Pais yesterday, one out of four people between the ages of 55 and 80 are very interested in this product. In fact almost 90% of those questioned were home owners and almost the same number of people also expressed the desire to live in their own homes until they died. Despite there being no official statistics on a reverse mortgages it is believed that around 10,000 have already been taken out.

Nevertheless Spain's biggest high street banks still regard reverse mortgages with a certain degree of suspicion and argue that legislation is still too vague regarding these kind of financial products.

In Spain around 30% of the population is over 65 years old – almost 14 million inhabitants - a growing figure which has persuaded smaller banks such as Ibercaja or Caixa Terrassa to offer reverse mortgages. El Pais reports the case of Roger Mateu and Rosa Verdaguer, both of whom are 82 years and who a year ago realised that their attic flat of 60 m2 in the centre of Barcelona could help them raise their standard of living. They took out a reverse mortgage for 300,000 euros and in return will receive 1,200 euros per month over the next 12 years. If the couple live another 12 years they will receive a total of 172,000 euros, which is 57% of the total mortgage. They told the newspaper that neither of them thought that they would be around to see the 12 years period finish, but if they were, according to the conditions of their reverse mortgage, they would still have the right to live in their own homes to the end of their days. The extra 1,200 euros per month is a welcome addition to their monthly pension of just 700 euros and, according to Mateu, now with their extra income from the bank if either of them get ill they will be able to stay at home and pay somebody to look after them.

The reverse mortgage offers its clients the commitment that following their death their inheritors have the possibility of repaying the bank in order to get the property back (the rest of the mortgage plus money received and interest). If this does not happen the bank has to pay the inheritors the balance of the unpaid mortgage agreed with its clients.

Reverse mortgages have evolved from another product which consists of property owners signing over their property to the bank which then guarantees them an income for the rest of their lives and allows them to live in the property for the rest of their lives. However, following their deaths their inheritors do not have the possibility of repaying the bank and getting the property back. All transactions are done before a Notary and the property is recorded on the property register just like any other property sale. All costs are paid by the buyer (the bank) including real estate tax.

Related: Mortgages in Spain

Spanish mortgages affected by Euribor rise

The Euribor rises to 4.1% in February

Spanish households with an average mortgage of around 140,275 euros over 25 years will have to pay around 90 euros more at the end of the month as a consequence of the 17th consecutive rise in the Euribor. Calculated over a year this is over 1000 euros more per household. At almost 4.1% it is at its highest since August 2001.

In 2006, 1,864,000 mortgages were granted, a figure 6.3% more than last year. The average mortgage is now more than 140,000 euros which is 12.6% more than 2005.
The Euríbor is the most widely used interest index used by the banks when granting mortgages, most of which are taken out at a variable interest rate. Yesterday’s rise in the Euribor will be confirmed by the Bank of Spain in the middle of March.

For those households that can’t meet the new payments there is the possibility of renegotiating their mortgages and increasing the years for it to be repaid. For example if it is a 25 year mortgage this could be extended to 30 or 35 years which would make the amount due to be paid at the end of every month more manageable.
However, experts have confirmed that the Euribor will continue to rise over the next few months.

At the beginning of February the president of the Central European Bank, Jean-Claude Trichet, hinted that in March interest rates would rise. Financial analysts have predicted that Trichet will raise interest rates by a quarter of a percent over 3.5% and by summer rates could be as high as 4%.

Average mortgage in Spain

The average mortgage among house buyers in Spain reaches 144,216 euros

Mortgages keep rising in Spain much to the dismay of many Spanish households. The Euribor has been rising constantly over the last few months and house prices keep on going up. An average mortgage in Spain is now over 10% more than a year ago.

The average mortgage varies between different regions in Spain. The highest average is in Madrid at 222,000 euros and the Basque Country at 206,000 euros compared to the lowest average of just 113,000 euros in Extremadura.

The Comunidad Valenciana is the region with the most number of mortgage holders with 603 per 100,000 inhabitants and Galicia and the Basque Country are the regions with the lowest number of mortgage holders per 100,000 inhabitants.

Spanish savings banks (in Spanish Cajas de Ahorros) conceded the highest number of mortgages followed by normal Spanish banks. The average interest rates paid by mortgage holders with a building society was 4.12% and the average length of a mortgage was 26 years. These figures compare favourably with banks which on average charged 4.21% interest on their mortgages over a period of 26 years.

97,6% of mortgages conceded in November 2006 were taken out with variable interest rates and just 2.4% were given at fixed rates. The Euribor was used as the reference interest rate for over 80% of the mortgages conceded.

In Novembre, 21,663 mortgage holders renegotiated their conditions over 16,000 of these were mortgages for houses, 26.7% more than the previous year.

Related:
Mortgages in Spain
Mortgages for non-residents in Spain
How to renegociate a mortgage in Spain

Mortgages in Spain almost equal the country's GDP

Mortgages for homes, businesses and Public Administration were valued at around 900,000 million euros at the end of November 2006. This figure is almost the same as Spain’s total GDP which is estimated to be 950,000 million euros. According to the latest figures by the Spanish Mortgages Association (Asociación Hipotecaria Española AHE), the total figure borrowed for mortgages in November rose to 896,042 million euros - 23.8% more than November 2005.

The AHE is expecting to see a rise of between 14% - 18% mortgages this year – less than 2006 which saw a rise of 23.8%. However this still means that the total borrowing for mortgages will reach a billion euros for the first time. The slowdown in mortgage lending is only affecting home mortgages. According to the Banco de España these only rose by 20.8% last October a figure which is below lending for other mortgages.

It is believed that the constant rise in house prices together with the rise in interest rates are putting off families from taking out new mortgages, although this doesn’t appear to have affected businesses from continuing to increase their credit from banks due to their increasing profits.

According to the AHE building societies and credit cooperatives continues lending money for mortgages at a rate higher than the banks. Building Societies in the month of November alone conceded double the number of mortgages lending 9,217 million euros as oppose to 4,735 million euros lent by the banks.

Related:
Mortgages in Spain
Ranking of Spanish banks

Average mortgage rates in Spain

The length, size and number of mortgage loans in Spain continue to rise.

According to figures released by the Spanish Property Registrars Association yesterday, and inspite of the recent rise in interest rates, property-buyers in Spain are opting for longer loans and the average length of a mortgage in Spain has risen to 26 years and 3 months, that is six months longer then the average stood at the end of 2005.

The average monthly mortgage payment has also risen to 789 euros, 40 euros more than during the last three months of 2005.

And more and more people are taking out morgage loans according to the figures released by the Spanish Mortgage Association yesterday which indicate that during the first term of 2006 business in the loans and mortgage sector rose by 26 percent compared to the same period in 2005.

Average price of property in Spain.

Meanwhile house prices continue to rise, although as predicted the rate has not increased with respect to the previous year. According to the Registrars' report released yesterday, house prices in Spain have risen by 15 percent over the past 12 months which is exactly the same as the previous 12 months. The cost of new housing in Spain rose by 11 percent, considerably less than resales where prices rose by over 19 percent.

The average price of property during the first term of this year was 1,916 euros per sq metre.

Related:
Mortgages in Spain
Spanish bank mortgages for non-residents
Spanish banks

Spanish bank mortgages

Euroresidentes is pleased to announce the signing of a new agreement with Spain's second largest savings bank, Caja Madrid, which we believe will be of interest to people who already own, or are intending to buy, property in Spain and are looking for a bank offering personalised services, great mortgage deals and other perks to non-resident (and resident) property owners.

During 2005 Caja Madrid contacted Euroresidentes to discuss with us the needs and preferences of foreign resident and non-resident property owners or buyers in Spain, in order to contrast what our visitors tell us about their experience with Spanish banks with the opinions the Bank's international team of financial advisors had formed over the past few years.

The result of an extensive number of meetings and on-going discussions is an agreement between Caja Madrid and Euroresidentes aimed at providing the highest possible level of personalised services and professional expertise to non-Spanish property-buyers or property owners in Spain. This includes, but is not limited to, excellent mortgage deals.

Caja Madrid has made huge investments in the past couple of years aimed at creating high quality personalised lending services at competitive rates for non-resident property buyers in Spain. The bank has made vast improvements to its online banking service, offers advice and service over the phone, has the highest possible customer service, and we are convinced that right now it is the best choice for non-resident buyers investing in property in Spain. Caja Madrid also has an extensive network of international branches all over Spain with specialised staff whose role is to serve the specific needs of non-Spanish speakers in their native languages.

According to the terms of the agreement Euroresidentes has recently signed with this leading Spanish Bank, Caja Madrid is committed to giving Euroresidentes visitors a reply within 24 hours of receiving their mortgage enquiry (same-day if your email reaches us before 14.00 and you supply a phone number), and to giving step-by-step guidance on how to apply for a loan. Caja Madrid offers clients the security of a consolidated bank (Spain's second largest savings bank) together with the binding commitment to offer our visitors the standards they are used to receiving at home.

We have been very impressed with the enormous investment Caja Madrid has made in recent years to create these specialised services to potential non-resident clients . If you would like to find out more about the special rates being offered to non-resident property buyers, please contact us and we will put you in contact with a Caja Madrid International Financial Advisor.

Mortgage loans in Spain

As the housing market continues to thrive in Spain, mortgages have become the central core business of Spanish banks around which all other bank activity seems to revolve. Even non-Spanish banks are starting to compete in the Spanish market as the demand for mortgages here just gets higher and higher.

The INE (Spain's National Statistics Institute) has just released mortgage figures for last May which break all previous records in Spain. According to the INE report, in May the total amount of mortgages rose to 20,577 million euros which is 26 percent higher than the same month last year.

The average loan also rose to 135,946 euros, 19.2 percent higher than May last year. And more and more banks are offering clients a mortgage of 80 percent of the property's official value.

Finally, following the trend in other EU countries, the Euribor continues to play an essential role in the mortgage sector in Spain. According to the INE, 97 percent of mortgages signed in May were with variable interest rates dependign on the Euribor and just 3 percent were with a fixed interest rate.

Related:
Mortgages in Spain
Mortgages for non-residents in Spain
Ranking of Spanish banks
Low interest rates in Spain boost housing market

Mortgages for non residents in Alicante

We have received this message from a British financial advisor of a branch of Caja Madrid in Benidorm.

In our area (Alicante) Caja Madrid currently offers non residents finance up to 85 percent of the value of their chosen property, at a standard rate of Euribor + 0.90 for 25 years. Of course, depending on the client and the amount, these rates may be subject to some flexibility but I am sure you are aware that in the current market, this offer is very interesting indeed

We can also offer a network of international branches along most of the south and east Costas of Spain, a network which is growing all the time. In our international branch in Benidorm, I am one of two specialist advisers, my colleague being a French financial adviser. We pride ourselves on our speed and flexibility and not only can we offer great mortgage deals to non residents but we can also offer a level of customer service that enables all euro resident clients to feel comfortable and relaxed, especially when dealing with such stressful events as purchasing property. We can also promise the same level of service from our German, Dutch, Belgian, Italian and Spanish euro resident colleagues..

The conditions are certainly very good. Usually the top mortgage amount for non-residents is 80 percent of the declared property value over a period of 20 years and euribor + 0.90 is a good deal. We have asked for more information regarding set-up costs and other details and when we receive them we will publish them here.

Anyone interested in further information, send us an email and we will forward it on to the Caja Madrid branch in Benidorm.

Related:
Mortgages for non-residents in Spain
Ranking of Spanish banks