Changes in margins for Spanish Mortgages

As banks in Spain continue to find the raising of funds difficult and costly so their requirement to widen margins has continued.

January so far has seen many banks increase margins above Euribor for their variable products and increase their fixed rate offerings to reflect the tough market conditions in the wholesale money markets.

Sol Bank have moved their general terms from 1% above Euribor to 1.25%

Barclays have pulled their 3 year and 5 year fixed rates and replaced them with 2.99% for 3 years and 3.50% for 5 years. The rates changed after fixed rate expires have also gone up now being 0.69% and 0.59% respectively. Variable rate has been held at 1% above Euribor.

Lloyds Spain who increased margins quite heavily in December have made no further changes in January.

Deutsche Bank has non-resident loans with linked products at 1.15% above Euribor

Other banks; who include those listed below; now regularly quote terms with margin above Euribor exceeding 2%. One of Santander’s offerings actually has a whopping rate of 3.5% above Euribor. These kind of rates make Sol Bank, Barclays, DB and Lloyds rates the most competitive in the market despite the recent increases.

• La Caxia
• Santander
• Caja Sur
• Bankinter
• BBVA

On a positive note for the right applicants; at the right loan to values; funding is still flowing and relatively easy to obtain. New activity for purchases has been remarkably buoyant in December and January.

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• euribor margins

Euribor, the index used by most Spanish Banks and to which variable loans are linked, are almost certain to rise as funding from the Central European bank is pulled back and more and more banks rely on market funding to obtain liquidity.

The three-month Euribor, which is the main indicator of market expectations, has risen 20% since September; whilst these increases seem to have stabilised the general view is that both 3 month and other corresponding Euribors will continue to edge up.

Until there is a more settled economic outlook for Europe and the cost of buying funds reduces, due to growing confidence in each other, the Interbank rates are likely to continue to reflect an upward curve.

For buyers in Spain who require a Spanish mortgage this could be a good time to take a medium term fixed rate with 3 to 5 years seeming to be the best bets.

Most banks have increased their fixed rates for the month of December and some now look decidedly unattractive; there however remains some good deals on offer, subject to perhaps compromising on loan to values and the requirement to take other compulsory products.

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August saw the first; all be it small; Euribor ( European Interbank offered rates) rise for 12 months.

The level of Euribor rates which has been at a historical low for many months is predicted to rise by about 1% over the next year. It was unrealistic to believe the rates could remain as low as they have been and increases should be gradual.

In itself, a 1% rise may not cause existing borrowers or new borrowers too many problems increasing payments by € 50 per month for every 100k borrowed on a 20-year repayment loan. Given however the fragility of the Spanish Economy and the high existing rate of defaults the Spanish Banks are experiencing it must be hoped that increases do not exceed the anticipated 1% increase and that Euribor base rates then level out at around 2.40% rather than continue to climb.

Given the trend is however for rate rises when looking for a loan considering a fixed rate above current variables could be a good option to hedge against where rates will finally peak.

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