Euribor (12 months), the interest rate normally used to calculate mortgage payments in Spain, fell 0.6% in February compared to the previous month. Euribor now stands at 1.225%, the lowest level on record. Euribor is 43% down over 12 months, and 77% down from its all time high of 5.393% in July 2008.

As a consequence of the latest reduction in Euribor, repayments on a typical annually resetting mortgage (150,000 euros, 25 years, Euribor +0.75%) will fall by around 65 Euros a month, or 780 euros a year.

When Euribor rose a fraction in December I suggested that, after 14 consecutive months of falls, a change of trend might be in the offing. Despite a return to declines in January and February, that still probably holds true. Flipping around is often consistent with a period of change.

Most of the savings from the fall in Euribor have already been had, and Euribor is unlikely to go much lower. By March borrowers on annually resetting mortgages will hardly notice any savings, even if Euribor goes a bit lower.

Euribor is based on interest rates set by the European Central Bank. Base rates are expected to remain at 1% for the first quarter of 2010, rising gradually after that.

Story by Mark Stucklin

Tags: Euribor, Interest Rates
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According to data released today by the National Statistics Institute (INE), the number of home mortgages issued during November 2009 was 52,043, representing a growth of 1.8 percent over the same month in 2008 and the first recorded rise since April 2007.

The volume of loan capital amounted to 6010.5 million, 10.1% less than the same month in 2008, which means that the average amount borrowed fell by 11.7% to 115,492 euros. Despite the rebound year in November, the cumulative comparison of January and November 2009 to the same period in 2008 showed an overall decrease of 23.2%.

Savings banks granted the most mortgages (52.2%), followed by banks (36.6%) and other financial institutions (10.9%). As for borrowed capital, savings banks granted 45.3% of the total, banks provided 43.0% and other financial institutions contributed 11.7%.

The average interest rate of savings banks was 4.25% and the average term was 23 years, while in banks, the average rate was 4.03% and the average term was 21 years. The variable interest mortgage remains the preferred option in 95.2% of mortgages, compared with only 4.8% opting for fixed rate. The Euribor was reported as the reference rate that was used in 88.7% of the mortgages.

The data also shows that in November, 40,156 mortgages had their conditions changed, 35.3 percent more than last year – 32,379 of these were changes in the conditions of a mortgage with the same institution (42.4% higher), mostly being attributed to mortgage payers taking advantage of lower interest rates and longer terms.

Tags: Euribor, Interest Rates
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Euribor (12 months), the interest rate normally used to calculate mortgage payments in Spain, fell 0.8% in January compared to the previous month. It now stands at 1.232%, the second lowest level on record.

Last month I reported that Euribor rose a fraction in December, suggesting that, after 14 consecutive months of falls, a change of trend might be in the offing. Despite a return to declines in January, that is still probably the case. Flipping around is often consistent with a period of change.

After January’s fall, Euribor is now 53% lower than it was a year ago. That means borrowers on annually resetting mortgages can expect some relief in their mortgage payments. As a consequence of the latest reduction in Euribor, repayments on a typical mortgage (150,000 Euros, 25 years, Euribor +0.75%) will fall by around 100 Euros a month, or 1,200 Euros a year.

Most of the savings from the fall in Euribor have already been had, and Euribor is unlikely to go much lower. By March borrowers on annually resetting mortgages will hardly notice any savings, even if Euribor goes a bit lower.

Story by Mark Stucklin

Tags: Euribor, Interest Rates
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Euribor 12 months, the interest rate normally used to calculate mortgage payments in Spain, rose 0.9% in December compared to the previous month, finishing the year at 1.242%. This was the first monthly rise in Euribor in 14 months, suggesting that a change in tendency is on the way. But despite the increase in December, Euribor is still 64% lower than it was 12 months ago. That means borrowers on annually resetting mortgages can expect some relief in their future mortgage payments. Euribor is based on interest rates set by the European Central Bank. Base rates are expected to remain at 1% for the first quarter of 2010, rising gradually after that.

The volume of new residential mortgages signed in October was 52,451, down 18% compared to the same month last year, and 16% compared to September, according to the latest figures from the INE. In value terms new residential mortgages were down 31% to 6 billion Euros. New mortgage signings in Spain have now fallen for 28 consecutive months, often by double digits. That illustrates the severity of Spain’s property crash, even if official figures disguise the extent to which property prices have fallen. The average new mortgage value also fell, by 15.8% to 113,882 Euros.

Story by Mark Stucklin

Tags: Euribor, Interest Rates
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Euribor 12 months, the interest rate normally used to calculate mortgage payments in Spain, fell 1 % in November to a new record low of 1.231 %. Euribor has now fallen for 14 consecutive months, and is 72 % lower than it was a year ago. As a consequence of the latest reduction in Euribor, repayments on a typical annually-resetting mortgage (140,000 euros, 25 years, Euribor + 0.5 %) will fall by around 240 Euros a month, or 2,800 euros a year.

Economic analysts expect Euribor to stay around current low levels in the months to come. Both Jean Claude Trichet, president of the ECB and Miguel Ángel Fernández Ordóñez, governor of the Bank of Spain, have said that current base rates are at the “appropriate level”.

The volume of new residential mortgages signed in September was 62,411, down 4.2 % compared to the same month last year. In value terms new residential mortgages were down 16 % to 7.3 billion euros.
The good news is the decline in new mortgage lending has been bottoming out in the last few months. It fell 31 % in June, 19 % in July, 7 % in August, and 4 % in September. If the trend continues new mortgage lending will soon be growing again year-on-year in volume terms. That will give some support to the housing market.

Story by Mark Stucklin

Tags: Euribor, Interest Rates
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Once a star performer in Europe’s 11-year old monetary union, Spain has become the wayward laggard. Growth data last week showed the Spanish economy – hit badly by a property market collapse and soaring unemployment – stuck firmly in recession in the third quarter, while the eurozone as a whole grew 0.4 per cent. The rollercoaster ride might suggest the European Central Bank would have difficulty calibrating policy steps to suit Spain and the other 15 eurozone countries.

During the economic crisis, Miguel Fernández Ordóñez, Spain’s central bank governor since 2006, has rarely given interviews. Talking to the Financial Times in the library of the bank’s plush Madrid headquarters, he strikes a distinctly cautious tone, but his messages are not so different from those of his colleagues in Frankfurt.

After the collapse of Lehman Brothers investment bank last year, the ECB cut its main interest rate farther and faster than ever before, to a record low of 1 per cent. He hints this monetary policy stance will remain for some time. “It is clear that any increase in [interest] rates is off the screen. The markets do not expect any change before the second half of next year,” he says.

He agrees, however, that with financial markets normalising, the ECB’s governing council should plan to remove emergency support, such as offers of unlimited liquidity for up to one year. “My reasoning is that those measures were exceptional because the markets did not work well. When the markets are working well, we should take them away because otherwise the markets will never work perfectly, ever. Support should be exceptional.”

Jean-Claude Trichet, the ECB’s president, indicated this month that the “exit strategy” would start in December, with the ending of one-year liquidity offers.

But is Spain ready for the start of such an ECB strategy, given its weak growth prospects? “Well, it’s ready for recovery,” Mr Fernández Ordóñez replies, “because recovery in Europe is the best news for Spain.” Some 70 per cent of Spain’s exports go to the eurozone, he points out. His biggest concern is that Spain pushes harder to bring public finances under control and increase labour market flexibility.

From one perspective, eurozone membership acts as a straitjacket in a downturn because devaluation is not an option. Worse, the euro is strengthening. Mr Fernández Ordóñez does not see things that way, however. “Of course you are right that we cannot devalue, and what does it mean? This means that we have to do more structural reforms so that you have the advantages [similar to those] of devaluing.”

As such, he is happy to see Spanish consumer prices falling faster than elsewhere. “Deflation in the euro area would be a disaster. But if you don’t have deflation in the euro area and we have a negative inflation differential in Spain compared with the rest of the eurozone, that would be the best thing. Reducing prices and regaining competitiveness is what we have to do.”

Story from FT.com

Tags: ECB, European economy, financial crisis, Interest Rates, Recovery, Spanish economy
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I recently read an interesting interview with Mikel Echavarren, head of Irea, a Spanish real estate consultancy, talking about the state of the real estate sector in Spain. As an experienced professional in touch with many different companies in the sector it is worth listening to what he has to say. Here is a selection of comments from his Q&A with Idealista News, the news section of the property portal Idealista.

Do you think there are any good investment opportunities in Spanish real estate today?
I think so but they are risky. In three years we’ll probably be kicking ourselves for not advising investors to invest now. There aren’t many opportunities in commercial real estate because there isn’t much product and rents haven’t yet adjusted. In residential, on the other hand, the correction has been very strong and fast. The ideal profile now is an opportunistic investor buying properties off banks by taking on the existing debt, a type of real estate venture capital.

So you think there are opportunities in a residential sector because the adjustment has already taken place?
There are hundreds of thousands of possible transactions, but not many genuine opportunities. What there is not is any financing, so anyone who wants to take advantage of this market has to take the debt with the asset, but there are still very few people prepared to do that today.

Has the price of housing and land touched bottom?
House prices touched bottom some time ago, they have already fallen all they had to fall. And the price of land has fallen faster than house prices although it could even fall a bit more. We have been saying at the top of our lungs that the price statistics published by the government are worthless, and damaging to the sector because they give international analysts the impression we are a country of idiots. In the US and the UK prices have fallen around 20% from the peak whilst here we have only fallen by 8%. We work with close to 28 property companies that have been restructured, and you see that valuations are down 30% in 2 years, and then banks buy those assets with discounts of 10-15% off valuations.

Do you think there is any residential property that will never sell?
What there is is a stock of land that will never be sold, at least not in 10 years. There are areas of Spain where the town plans look like they were designed for an invasion of extraterrestrials, parts of Almeria, Murcia and Alicante. There is an overdose of land that will lie in the warehouses of banks for many years. On the other hand, the stock of finished property will be absorbed sooner.

Is there any real demand for housing at the moment?
Yes, quite a few homes are being sold. We would have to place it at more than 200,000 homes a year. What is not selling is off-plan, as there you take the risk of the developer or builder going bankrupt. It’s a good time to buy newly built homes with Euribor at 1.24%. They won’t be any cheaper next year. And when prices start to rise they will do so at a rate of 10% per year.

How does one get the Spanish property sector to recover?
The residential sector is already recovering, just not the developers, who won’t see the light at the end of the tunnel for three years; it is very bleak for them. Clients of ours tell us they have sold a lot this summer, and some banks tell us that they have had more mortgage requests this summer than in all 2009. Furthermore, we believe that developers have dropped their prices to the minimum. There is mortgage financing available, not much, but there wasn’t any at all in 2008, and now there is. Mortgage costs are low, and it appears that the future is not going to get any worse. The recovery is underway, although this won’t show up in the official statistics until the first half of 2010. As soon as there is a general perception that things are getting better, house prices will stop falling and start rising.

Story from Idealista News

Tags: buying property in Spain, Euribor, House prices, Interest Rates, Property market trends, Realistic House Prices, Recovery, Spanish property
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Euribor (12 months), the interest rate normally used to calculate mortgage payments in Spain, fell 1.4% in October to a record low of 1.243%. It has now fallen for 13 consecutive months, and is 76% lower than it was a year ago.

Monthly repayments on a typical annually-resetting mortgage (150,000 euros, 25 years) will drop by around 300 euros a month, or 4,000 euros a year, to 640 euros/month. Significantly lower monthly mortgage repayments have given many borrowers financial breathing space they did not have when Euribor stood at 5.26% in October last year. Estate agents report this is taking some pressure of the property market, by reducing the number of forced sellers. Many more borrowers can now afford to take their homes of the market in the hope of selling when the market recovers.

The average value of new residential mortgages signed in August fell 19% to 11,753 euros compared to the same time last year. The number of new mortgages signed by 6.6% to 52,482. Fewer, cheaper mortgages put downward pressure on property prices. The average interest rate on new mortgages in August was 4.3%. Interest rates from banks (4.15%) were better than savings banks or cajas (4.46%).

Many analysts expect Euribor to continue falling until the early part of 2010, further reducing the cost of money to Spanish mortgage borrowers.

Story by Mark Stucklin

Tags: Euribor, Interest Rates
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Euribor (12 months), the interest rate normally used to calculate mortgage payments in Spain, fell 5.5% in September to a new record low of 1.261%. Euribor has now fallen for 12 consecutive months, and is 77% lower than it was a year ago.

Monthly repayments on the average annually-resetting mortgage (150,000 Euros, 30 years, Euribor +0.85%) will drop by around 435 Euros a month, or 4,150 Euros a year, to 555 Euros/month. However, many borrowers will not benefit thanks to clauses in their contracts that set a floor for interest rates.

There were 58,995 new residential mortgages signed in July, 19% less than a year ago, according to figures from the INE. In the first 7 months of the year new mortgages were down 30% compared to the same period last year.

The fall in new residential mortgages appears to be bottoming out (year-to-date in May -35%, -31% in June, and -30% in July). In value terms, new mortgage lending fell 34% to 6.7 billion Euros in July, or 41% in the first 7 months of the year.

Tags: Euribor, Interest Rates
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The sharp housing correction that has sent Spain’s economy into a tailspin is bottoming out, Housing Minister Beatriz Corredor told parliament Wednesday.

“Recent indicators show a trend toward stabilization in the housing market,” Corredor said.

Spain’s once-buoyant housing market collapsed last year as the global financial crisis worsened a correction that was already underway after years of overbuilding and spiraling house prices.

Data Tuesday from Spain’s national statistics institute showed the number of houses sold in Spain rose 4.7% in July, their third consecutive month-on-month gain, though they were down 20% from July last year.

Falling housing prices and interest rates are helping to improve the affordability of housing, Corredor added, saying this should stimulate demand.

The government has offered incentives to convert unsold homes into rental properties or to sell them to qualified buyers in social-housing programs. It has also said it will limit current tax incentives on home purchases from 2011 in an attempt to bring forward decisions to buy.

In a note to investors Wednesday, Citigroup economist Giada Giani said the rise in July home sales points to an improvement in Spanish property demand, but noted that housing construction indicators continue to “decline sharply, depressed by the huge amount of unsold inventories.”

Story from Nasdaq

Tags: House prices, Interest Rates, Property market trends, Recovery
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