Deutsche Bank today announced until further notice it will no longer lend in Spain to persons who earn in a currency outside the Euro.
Rationale for this change to credit policy is the current level of defaults and repossessions they are experiencing and their concern over currency fluctuations. The directive has come from Germany and would appear to be a knee jerk re-action to the current situation where an already expected level of properties have had to be taken over by the Bank.
Given the process of repossession takes up to three years in Spain this influx of repos relates to defaulting mortgages from historic times rather than mortgages granted within the last couple of years. The term horse, door bolted comes to mind.
For the last two years DB has had a sensible credit policy providing only up to 50% loan to value and a criteria that has attracted the best quality clients. It is a ludicrous decision to withdraw basically from the nonresident market because of what happened in the past and the consequences being suffered from this. DB will now only offer loans to either the resident market in Spain which would seem far more risky than international clients or the odd German who wants a mortgage.
Very few other Euro members buying in Spain with the most prolific buyers coming from countries outside the EU.
The new edict is taking immediate affect and even applications where a valuation has taken place and the loan is financially approved they will not guarantee honoring. This could be a PR disaster waiting to happen as clients will have paid for valuations and may find themselves after this cost unable to go to completion.
It could be seen given timing as a clear discrimination against UK residents who remain the largest buyers of property in Spain.
It can only be hoped that in due course common sense will prevail and the person who made the decision in Germany will see that they have lost profitable and quality business going forward without resolving the issues they have, which cannot be resolved by current decisions as they are as a result of past decisions.
