August data
Data for Mortgages in Spain for August showed a small decrease month on month for average loan size, capital lent and numbers of new home loans constituted.
Whilst the numbers dropped from July when assessing the data against the same of the previous year across all three areas the figures were more buoyant.
Against August of 2017 the number of new loans showed an increase of 6.8%, the level of capital lent rose 17.3% and the average loan size was up 9.8%.
Whilst the decrease between July and August in terms of numbers has been unusual based on the last two years prior to 2016 it was quite normal for August figures to be below Julys often due to the holiday season and less people wanting to move house during the holiday season.
Total new lending
In total 28.755 new credits for the purchase of a house were registered at land registry and capital lent was 3.520.292. The average loan size dropped from 125.1k in July to € 122.424 in August but this was significantly up from August of last year when the average loan size was only € 111.400.
Accumulated for 2018 to date the year sits 9.7% up on numbers of new Spanish loans, 15.8% up on level of capital lent and 5.5% up on average loan size.
The amount of money lent for purchase of homes as a percentage of all credit dropped slightly in August from 65.7% to 62.5%.
Interest rates and product types
The annual 12 month Euribor whilst remaining in negative territory has seen very small increases in the last two months. In August the average rate by which loans completed was up from 2.59% in July to 2.62% in August. This is still below the same month of last year when average interest rates were 2.74%.
40.2% of all new lending was taken on a fixed rate and overall the fixed rates were 3.1% less than in 2017. Average fixed rate over a 24 year term was 2.99% in August. Average variable rates were 2.43% so whilst lower for the stability of a 24 year fixed rate the fixed rates continue to look to be very good value for money when considering best buys.
Andalusia has a good month
Regionally of the Coastal holiday areas Andalusia saw good increases in the month being up 11.2% in numbers of new Spanish Mortgages over July and 13.7% up in money actually lent.
Year on year Andalusia also showed some growth against August of last year.
Regions not fairing so well in the month included the Balearics down 4% in terms of number and 10% in terms of money lent.
Cataluna and Valencia also saw dips in the Month and Cataluna despite last years problems which saw loan levels dip toward end of 2017 remains a little in th doldrums being only 2.8% up year on year for capital lent and 3.7% up on numbers. This compares to an average for the whole of Spain of an increase of 17.3% in terms of capital and plus 6.8% in terms of numbers.
Murcia growth is also slow but Madrid, Valencia and the Canary Islands are all above average.
Net inflows for lending
The number of loans cancelled or redeemed at land registry in the month were 24,804 so with 28,755 new home loans the Spanish lenders saw a net inflow within the month.
AJD tax update
On top of having a net inflow the Banks in Spain finally initially got some good news about AJD tax. The Supreme Court by a very small margin have reverted a previous decision and the loanee will be picking up the cost of mortgage deed tax.
Whilst any change to this would have meant Banks would raise interest rates on Mortgages in Spain to compensate for the cost of paying the tax the relief will be that there will be no retrospective claims which the original decision had said could happen for anyone completing in last 4 years. The potential cost of this had sent bank shares on a steep downward turn and caused concerns as to whether finally the tax office would liable making a big hole in the Spanish economy.
Whilst for one day the issue went away the following day the unelected Prime Minster Sanchez said Thursday 8thof November he would use his emergency powers to make a Royal Decree that Banks pick up mortgage deed tax. This will not be retrospective so the lenders have no back costs and will increase interest rates to https://www.cnbc.com/2018/11/07/reuters-america-update-3-spain-to-change-the-law-to-force-banks-to-pay-mortgage-stamp-duty.htmlcover the new cost to them.
Challenges for the Spanish lenders
Other matters also remain unsolved and may as yet come back to bite the Banks. The most pressing of these is the hearing now in Luxembourg brought by Abogados Urbe and Res Abogados who are making claims that linking borrowers to the IRPH rather than Euribor a tactic used by the Cajas when they were in existence was abusive.
Borrowers were not given a choice of index to have their rate linked to and the IRPH has run above the Euribor for many years. It is estimated on a loan of 150k over the last 12 years the borrower would have paid € 37.000 more in interest than if they had been linked to the Euribor.
Many mainstream lenders who took over struggling Cajas during the Banking crisis have books linked to IRPH and if this case is won the compensation levels could be hefty.