The downgrading of a number of Spanish Banks, Spain itself and the previous weeks downgrading of a number of UK Banks who lend in Spain has seen a very quick increase in margins across the board.

Even Banks like Barclays who missed the downgrades this time round have increased their variable non resident rate from 1.95% to 2.35%.

By far the biggest impact on the Spanish market of the downgrades as it relates to foreign buyers is Lloyds moving minimum margins from 1.5% to 3%. As the last interest only lender to gain 5 years interest only with Lloyds now costs a massive 3.80% above Euribor.

Changes are immediate with only full applications received in full by 21st October having the old rates held.

Against this backdrop the good news seems to be that for their own stock Spanish Banks are absorbing increases in costs.

Banco Popular will offer 0.25% above Euribor for first year followed by 0.50% and Sol Bank are offering 0.60%. With funding up to 100% available at such keen rates Bank owned property is looking good to offer on. Yearly interest costs from the normal 4% Sol Bank rate to their bank owned rate means for every 100k you borrow you save € 1.344 per year in interest payments.

Spanish Markets In Turmoil! is a post from: Spanish Mortgages Experts International Mortgage Solutions

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How long it will be before the last lender at 1.25% Sol Bank hold this margin remains to be seen but we anticipate some movement upwards in the next few weeks.

This continuing trend is in danger of dampening demand. Foreign buyers have found it increasingly difficult to borrow at home by way of release of equity against their assets there as banks in other countries withdraw product for this type of loan at the same time as Spanish Mortgages become less and less attractive on rate.

We appear to be in a cycle of catch 22; demand being dampened resulting in no growth. No growth resulting in lower credit ratings for bank and Spain itself consequence of high cost if funds meaning increases in mortgage margins to make lending cost effective.

Deutchse Bank Raises Mortgage Interest Rate to 1.8% Above Euribor is a post from: Spanish Mortgages Experts International Mortgage Solutions

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The rather optimistic view is at odds with what is happening to other banks and their view of the market.

It is difficult to see how arrears in Spain; particularly for a bank like Santander who lent predominately to the resident market; will actually drop over coming months.

Unemployment all be it predominately for the younger generation is at 21%. Most businesses particularly those in the financial sector expect to retrench rather than employ this year as mergers between Caja’s gather pace and look to list. They require cost savings to make these attractive to investors and the bulk of this will come from efficiencies and economies of scale. The firms looking to shed jobs this year will not affect those at the beginning of their careers but will affect the 40 plus in a way perhaps not seen in Spain before.

The people who will be affected by companies cost cuttings are those with mortgages and this year we will see more of these types of cuts than previous ones.

Euribor rates which hit an all time low last year and have shielded mortgagees for the last 12 months with overall rates of anything as low as 1.5% have steadily risen. This month for reviews and new loans the 12 month Euribor is 2.08%. Even if the loan was secured at a very low margin above this year most mortgagees will be hit by a minimum 1% increase in their rate. For a mortgage of 100k on a 25 year term this equates to an extra € 376 per month the household will have to find. 12 Euribor rates are expected to continue to climb so by end of year mortgage reviews we could see increases as high as 2% or more to overall rate.

Spain has no control over these rate rises so has to live with a stagnant economy and rising household costs.

Given this environment it is difficult to see the Botin’s predictions of a stabilising arrears book and improving property prices actually be realistic this year.

Most pundit would predict 2011 will continue to see arrears rising and prices in some areas continuing to fall as banks make efforts to clear the vast numbers of surplus stock.

Santander say Spanish Mortgage Arrears Will Fall is a post from: Spanish Mortgages Experts International Mortgage Solutions

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Price are expected to continue to fall and it is difficult to see in some areas prices bottoming out before the end of this year or next although in some areas demand remains reasonably high.

Banks will continue to be cautious about the granting of mortgages in a declining sales and price market so we expect no relaxation of criteria or enhancement of loan to values to happen during 2011.

Clients requiring above 60% to 70% will need to focus their searches on bank owned property.

There continues to be pressure on cost of funds for the bank and last month for the first month in many borrowing from the Central Bank by Spanish Banks increased as money markets contracted for them.

The price of funds is reflected in the mortgage pricing banks are offering.

Deutsche Bank increased their margin from 1.15% this month to 1.5% above Euribor. Lloyds did the same a couple of months ago.

Many banks have now removed the ability to take a mortgage without life cover at higher rates and instead insist life cover is taken full stop. This is to ensure profitability of lending. Many banks like Sol Bank, and La Caixa now add a lump sum life cover to loan to prevent the life cover being cancelled at a later date.

Barclays and Lloyds remain the only two banks with some products where life cover is not compulsory. The Spanish Banks still lack transparency in ensuring clients understand the linked products when quoting and it is not uncommon for brokers to forget to tell clients either.

No longer can headline rates be taken as the true cost and clients should always ask the question, is life cover required, and what would be the cost. For clients age 45 years and younger, life cover premiums are reasonable, but for client 45 years and older there is a very strong argument for taking a higher rate from one of the banks that does not have life cover than a lower rate with one that does. Finding all this out at Notary on day of signing rather than being clear beforehand may make it all too late to change and could put deposits at risk.

Spanish mortgages market update June 2011 is a post from: Spanish Mortgages Experts International Mortgage Solutions

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Yesterday it was announced the recently announced (Forbes Magazine)  richest man in the world Carlos Slim has bought into La Caixa.

La Caixa should be one of the first savings bank to fully list and this endorsement will undoubtedly help the listing process and encourage other investor to buy the banks shares.

Finally some good news for Spanish Banks! is a post from: Spanish Mortgages Experts International Mortgage Solutions

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The unnamed Spanish resident who handed back the keys to BBVA Bank when he was unable to maintain his mortgage payments has been dissolved of responsibility by the Judge for the outstanding amount between the loan and the amount the bank finally sold the property for after repossessing.

Whilst it has long been the case that if a bank agrees to take property back any future responsibility from the borrower is removed; in cases where the keys are handed back and the bank has not agreed to take property back; a continuing lifetime responsibility to pay back any difference exists.

The legal deed signed by borrowers stipulates they are giving both the property as security and a personal guarantee.

In an American style ruling the Judge stated that it was morally wrong for banks who irresponsibly lent during boom times; and caused the financial issues now affecting Spain and its unemployment levels; to be able to continue to pursue an individual for their lifetime and that the bank took security of a property this being the difference between granting a mortgage and granting a  personal loan.

It will be interesting to see if this ruling speeds up the mortgage reform which many politicians and the public have been pushing for and what affect it has on banks desire to lend.

Landmark Spanish Legal Ruling In Favour Of Mortgagee is a post from: Spanish Mortgages Experts International Mortgage Solutions

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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
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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.

Spanish Banks Change Margins for Spanish Mortgages is a post from: Spanish Mortgages Experts International Mortgage Solutions

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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.

Eurobor set to rise? Now is the time to fix your Spanish Mortgage Rate. is a post from: Spanish Mortgages Experts International Mortgage Solutions

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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.

Euribor Rates on the Rise for Spanish Mortgages is a post from: Spanish Mortgages Experts International Mortgage Solutions

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Bancaja who reduced loan to values to 60% at end of last year and removed interest only have in recent days said that they can consider on a case-by-case basis up to 65% loan to value for non-residents. This relaxation is possibly in response to a collapse of their non-resident applications and reverses a trend for them of increasingly tightening criteria’s.

Deutsche bank also announced last week that they have relaxed their criteria from 50% loan to value to 60% for non-residents.

Sol Bank conversely have; whilst keeping their 70% option; increased rates. They have incorporated a first year rate of 2.75% followed by Euribor plus 1.15% this is up from the previous 0.95% above Euribor with no first year rate incorporated.

It remains the case with all the banks with the exception of Lloyds/Halifax that life insurance is being insisted on. All Spanish banks need to cross sell other products to prop up incomes and profitability and whilst it is not legal to insist on other products are now digging in their heels whenever approving a loan. Most Spanish Banks have no access to wholesale funds to provide loans so are very reliant on lending the deposits they have and profit from other income streams.  It is also still the case that even where funds come from wholesale markets the price the banks have to pay for this money and the rates they can charge leave little actual short-term profit on lending.

More and more banks are starting to offer special mortgage terms for clients buying bank stock although promotion of this remains poor except where banks are promoting the offers to Spanish Nationals.

The trend for Euribor rates last month was upward and whilst these increases are very very small we seem to have hit the bottom on the Euribors with the trend of downward movement at the very least stalling. This does not mean we will see big increases in the various Euribor rates but small and steady increase across the board during the next few months.

All in all the news is a mixed bag with some positives and some negatives. I suspect this trend will continue as each bank assesses their own current market position and balance sheet strength with no clear consensus amongst banks as to the overall way the market is moving.

A Review Of Spanish Mortgage Lending May 2010 is a post from: Spanish Mortgages Experts International Mortgage Solutions

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