The latest rumours coming out of Spain suggest Caxia Catalunya may be experiencing problems. Heavily involved in development funding Caxia Catalunya hope not to follow Caja Castilla La Mancha who have had the Bank of Spain step in to run and restructure it.
Caja Castilla La Mancha like Caxia Catalunya was a large regional bank who ventured outside their normal stronghold and both banks now have a nationwide presence. For what were regional banks both have a large number of branches and many jobs at risk without government intervention. Spain’s government do however appear to have acted decisively and quickly with Caja Castilla La Mancha after other banks refused to take over exposure to their risk and it is hoped that Caxia Catalunya if existing problems cannot be resolved will also be assisted.
Margins above Euribors continue to increase weekly. Bancaja one of the few non-resident Spanish Mortgage lenders remaining at 70% loan to value put margins up across the board this week and introduced a first 6-month rate that is well above prevailing variables. The lowest margin with Bancaja is now 1.39% above 12 monthly Euribor with a first 6-month fix of 3.90%.
Halifax’s Spanish arm Banco Halifax Hispania have now issued small lending targets to branches which is a step in the right direction and a big move from the zero lending targets that have been in place for the last 3 quarters.
Unlike Halifax, Sol bank like many others are looking for no growth this year and are only lending monies released by redemptions or ECO funds supplied by Spanish Government for small businesses. Sol bank is part of the Sabadell Group has now also integrated policy across all brand names and wants to end 2009 with the same level of Spanish mortgage balances as they started the year with. As part of their new integrated policy, strategy may be slightly different from region to region but no longer from brand to brand as was the case previously.
Many other banks have a similar strategy for 2009 so the best month to apply for a mortgage is the month after the banks have had redemptions on existing loans. It would be very helpful if the banks were more forthcoming about funds available on a month-by-month basis. For those of us old enough to remember this is like going back to the bad old days of mortgage quotas something none of us ever thought we would see again.
Most banks in Spain continue to adopt the practice of trying to insist on costly add on products like life insurance being linked to an approval or interest rate; even if the add on product is not required by the client. Whilst it is not legal in Spain to insist on compulsory products outside buildings insurance and bank account, it is difficult to prevent as the bank can reject applications with no rationale required so consumers are being in reality blackmailed into taking them.
Whilst appreciating the current difficulties for banks on liquidity and default rates it is difficult to justify the practices currently being adopted. Increased margins sit with the loan for the lifetime of the loan whether underlying indexes increase or not and so do compulsory products. Whilst consumers are happy at present to pay these this is only because the base rate is so low. The banks appear to be using the difficult situation to ensure future profits after the credit crisis has disappeared are maintained at unreasonably high levels and yet again the consumer is the one paying for it.
One can but hope this does not become a catch 22 situation where consumers stop buying as they realise they are being tied into potentially costly long term funding products. The impact of this would be to slow down the economy further across Europe and add to the crisis rather than help resolve it.
Given it is a common view the banks caused much of the crisis affecting everyone governments only seem to be focussing on regulation relating to bonus payments to executives and risky investment in intangible products. Behind this, no one seems to be noticing how banks are reverting to style and using lending requirements to ensure other bank products whether right for client or required are sold.
On a more positive note monthly Euribor figures suggest the market expects ECB base rate to fall to 1% in the short term. Current monthly Euribor is at 1.01%. The 12-month Euribor however remains above 1.70% and is now dropping at a much lower pace than previously experienced.
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