Posts Tagged ‘Mortgage Lending’

 

May 6th, 2011

Euribor (12 months), the interest rate generally used to calculate mortgage repayments in Spain, rose to 2.086 in April, a change of +8.4% compared to the previous month, and the first time Euribor has been above 2% since February 2009.

On an annualised basis, Euribor is 70.3% higher than it was a year ago (see graph above), meaning higher monthly repayments for borrowers with mortgages resetting now.

Repayments for a typical mortgage (150,000 Euros, 25 years, Euribor +0.25) will go up by around 64 Euros per month, or 775 Euros per year. That will punish many a stretched household budget in Spain.

Interest rates over the last 20 years

Where will rates go from here? Upwards, most likely. The chart above, from property portal Idealisa.com, plots interest rates over the last 20 years. As you can see, we are in a period of exceptionally low interest rates (that are probably incubating the next crisis).

Story by Mark Stucklin

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September 17th, 2010

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, has now risen for 5 consecutive months to its highest level in more than a year.

Euribor reached 1.421% in August, an increase of 3.5% on the previous month, and 6.5% higher than August last year.

As a result, borrowers on annually resetting mortgages will have to start paying more. Repayments on a typical annually resetting mortgage (150,000 Euros, 25 years) will rise by around 6 Euros/month, or 70 Euros/year, to around 594 Euros/month.

This is the first time that Euribor has risen on an annualised basis since October 2008, when the credit crunch first griped the markets. Interest rates then tumbled as central banks poured money into the banking system. Rates are now starting to rise as investors fret about a fiscal deficits and inflation.

Story by Mark Stucklin

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May 12th, 2010

Euribor (12 months), the interest rate normally used to calculate mortgage payments in Spain, rose 0.8% in April compared to the previous month, taking it back to 1.225% where it was in February. This is only the second time Euribor has risen on a monthly basis since September 2008.

Despite the rise in April, Euribor is still just a fraction above the record low it hit in March. It is still 31% lower than it was a year ago, and 77% lower than it was in July 2008. Because Euribor is still lower than it was a year ago, repayments on a typical annually resetting mortgage (120,000 Euros, 25 years, Euribor +0.8%) will fall by around 41 Euros a month, or 420 Euros a year.

Many experts think that Euribor has fallen as far as it can and expect rates to start rising modestly. It won’t be long now before borrowers starting seeing their monthly payments rise, albeit a small amount. Euribor is based on interest rates set by the European Central Bank. Base rates are currently at 1% but are expected to rise gradually during the course of 2010.

New mortgage lending rose 8.5% in February compared to the same month last year, according to figures from the National Institute of Statistics (INE). That is the second consecutive month of growth in mortgage lending, a good sign for the market. On a monthly basis there were 54,813 new mortgages signed in February, up 6.2% compared to January.

The average loan value was 118,185 Euros, a fall of 4.6% compared to last year. Overall new mortgage lending was 6.478 billion Euros, up 3.5% on last year. The average interest rate was 3.97, 26.5% below a year ago, and 2% lower than January.

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May 6th, 2010

A new generation of British buyers are entering the Spanish property market – lured by cheap homes. UK agent sales are up on this time last year, with more Brits choosing investment properties in locations such as Turkey and Egypt. But buyers who were putting off finding holiday homes during the recession are also returning to traditional destinations such as Spain.

Holiday-home buyers in Spain and France still dominate the market – and many have decided now is the time to buy. The two countries made up two-thirds of UK based broker Conti’s overseas mortgage business last month.

Enquiries for Spanish properties make up 92% of the current demand, compared with 50% just two years ago. Two-thirds of our clients have been registered with us for over a year. Most people have thought about buying before – Spain isn’t a new destination for them. But there’s been some recognition that maybe prices won’t go down further.

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April 20th, 2010

Buyers are back looking for holiday homes. Mortgage broker Conti Financial Services, which specialises in overseas mortgages, reports a big increase in mortgage applications and the busiest month for over a year.

The foul winter in the UK has probably helped concentrate buyers’ minds on that place in the sun and mortgage applications rose by 48% in March compared with the previous monthly average.

European banks have not suffered as much from the sub-prime crisis as UK mortgage lenders and Conti says that overseas mortgage providers have money to lend to foreign investors. ‘Falling property prices across many European destinations – in some instances by as much as 50% – mean that the chance of owning a place in the sun may never be better, and historically low interest rates mean it’s become even more affordable for British buyers,’ says Clare Nessling, Conti’s operations director.

‘The most popular destinations amongst our clients are still France and Spain, both of which come with easy access and good rental opportunities,’ she says.

Nessling reports bargain hunters out in force in Spain where oversupply of properties and fears about planning permission have left the banks holding repossessed properties which are being sold off. ‘Confidence is definitely growing, but there’s also an element of buyers snapping up bargains in traditional hotspots while they have the chance.’

So where will you find a bargain? ‘Those European countries yet to record their first quarter of growth since the credit crunch include Spain, Denmark and Ireland where an oversupply of stock is holding back prices,’ says Liam Bailey, head of residential research at international estate agents, Knight Frank.

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April 18th, 2010

According to Contithe overseas mortgage specialis, an increasing number of British investors buying second homes in Europe are taking out euro-denominated mortgages in order to beat the poor exchange rate. This not only allows them to take advantage of cheap interest rates, but could potentially save them significant sums of money if, as experts predict, sterling appreciates against the euro over the next few years, as this will reduce the sterling cost of the property purchase.

Clare Nessling, Conti’s Operations Director, says: “A euro mortgage could be a good idea, even if you thought you didn’t need one. As you’ll only need to transfer money for your deposit and fees for now, it minimises the amount of sterling you have to exchange for the property purchase. Even if you’re lucky enough to be a cash buyer, it may be worth taking out a mortgage until the exchange rate improves, at which point you can pay it back, and ultimately reduce the price you pay for the property.”

There are a number of other benefits associated with euro mortgages. If, for example, an investor is going to rent out their property, having a euro mortgage means that their rental income and mortgage repayments are in the same currency, and they can therefore avoid exchange rate fluctuations.

A euro mortgage also allows them to benefit from European interest rates, which are often lower than sterling rates. Even a small difference could potentially save them a lot over the lifetime of the mortgage. The fees on some euro loans can also be substantially lower than on some sterling mortgages.

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April 17th, 2010

There’s a growing feeling of confidence amongst prospective overseas property buyers, according to Conti, the overseas mortgage specialist. It’s just had its busiest month for almost a year in terms of mortgage ‘go aheads’, the point where prospective buyers take their mortgage quotes through to the application stage. These increased by 48 per cent during March, compared with the previous monthly average. The proportion of prospective buyers progressing from the quote stage to the go ahead stage has also increased, suggesting that buyers are becoming more serious about their intended investment.

Despite the turbulence unleashed on the UK mortgage market by the global banking crisis, Conti says that overseas mortgage providers have a healthy appetite for lending to foreign investors. But a combination of factors, not just mortgage availability, are contributing to the attractiveness of this market. Falling property prices, in some cases by up to 50 per cent, and historically low interest rates are making it much more affordable, despite the current strength of the euro.

Clare Nessling, Conti’s Operations Director, says: “Falling property prices across many European destinations mean that the chance of owning a place in the sun may never be better, and historically low interest rates mean it’s become even more affordable for British buyers. The most popular destinations amongst our clients are still France and Spain, both of which come with easy access and good rental opportunities. Confidence is definitely growing, but there’s also an element of buyers snapping up bargains in traditional hotspots while they have the chance.”

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March 1st, 2010

New mortgage lending in Spain is still very depressed, say the latest numbers from the National Institute of Statistics (INE). These figures are one of the few reliable housing market statistics we have, so it’s always worthwhile paying attention to what they have to say.

According to the latest figures, for December and therefore the whole of 2009, new mortgage lending fell again last year, by 22% in volume terms (to 653,173), and by 34% in value terms (to 76.8 billion Euros). These are the lowest levels in both volume and value terms since the INE started publishing this data series in 2003.

The number of new mortgages signed have been falling now for 3 years, and the value of new mortgages has been falling even faster. That means there is less money around to spend on property, which puts downward pressure on prices.

Mortgage lending has been falling in both volume and value for the last 3 years, though the rate of decline improved slightly in 2009. That means it is still falling heavily, just not by as much as last year.

Also, over the last 2 years, new mortgage lending has been falling more in value terms than in volume terms. That means that the average mortgage value is also falling, as borrowers take out smaller mortgages. The average value of new mortgages last year was 117,688 Euros, down 16% on 2008.

Why are people taking out smaller mortgages? Firstly, because the banks have tightened up their lending criteria, and now demand bigger deposits. But also because Spanish property prices are falling, so borrowers don’t need such big mortgages as before.

Peak to trough, new mortgage lending is down 51% by volume, and 59% by value, compared to 2006, when the market peaked. That is a massive decline in the amount of money around chasing property.

Story by Mark Stucklin

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