Mortgage legislation changes in Spain
This month saw new regulations relating to a cooling off period for buyers contracting a mortgage in Spain where the signing is in Andalucia.
The legislation changes which are only for loan signings made within the Andalucia region will lengthen the time it takes to get to completion.
Also if a signing for a mortgage in Spain has to be postponed at Notary for any reason technically the cooling off period must start again.
Whilst after years of Banks in Spain being very loose with information given it has been refreshing to see them brought into line in terms of outlining all the product terms clearly and concisely, the new mortgage regulations seem to be a sledge hammer to crack a nut and overly bureaucratic.
New cooling off period
It is now required that all potential borrowers of a mortgage in Spain are given between a 3 to 5 day cooling off period and new documents must be sent to the client and be signed by the client before a completion can take place.
Previously and within all other regions the Spanish lenders were required to supply the client with a FIPER at application and loan approval stage. This FIPER outlines the terms and conditions by which the loan is approved and should then match the offer document and the deeds at signing.
Only in Andalucía
Andalucia now require the Banks to add to this requirement three new information documents when granting a loan.
The first is a FIPRE which is an initial general information document. The second is a DIPREC which is pre-contract and will include additional information about the terms and conditions. The FIPER which is issued at approval remains as is but must now be accompanied by a DIPERC which will confirm complimentary information about the Mortgage in Spain.
Many of these seem to be duplications that could all be incorporated into two documents the FIPER and the binding offer.
Finally the binding loan offer will be issued and all the new documents will need to be signed by the client and returned to the Bank before completion can take place. The completion will not be able to take place until the applicant has had all the documents and been given up to 5 days cooling off.
August registered home loan completions.
After July where completions dropped off August completions rose again according to land registry.
The average loan size fell back against July down by 5K but capital lent and numbers of loans all increased. Against August of the previous year all areas rose. The number of loans year on year were up 6.4%, the level of capital lent was up 11.5% and the average loan size for mortgages granted to buy a home rose by 4.8%.
New signings
New signings in August also rose and loans made for the purpose of buying a house were up 20.7% year on year. As with loans registered at land registry there was a small fall in the average loan size.
The Notary offices registered an increase in the purchase of homes of 17.4% but a fall back in average price per meter square of 4%. This drop in prices will explain the drop in average loan size.
Annually the numbers year on year remain in positive territory but are not as buoyant as one would have hoped, with only the last 4 months of the year left now in 2016.
August over July
The amount of new loans registered at land registry for the purpose of buying a house rose to 55% of all new credits from 51% last month.
The increase in lending, registered at land registry, in August over July is unusual being the only time in at least the last 5 years where signings have been higher in August than July. Given Julys completions were down it would appear for whatever reason that signings usually undertaken before the holiday season starts slipped into August.
Fixed rate mortgage product types continue to rise in popularity and now form nearly 30% of all new contracts. This has steadily grown from a very small base a couple of years ago.
Where the variable rate is contracted the 12 month Euribor is the index used in 92% of all new transactions.
Despite the Euribor being in negative territory in August the average interest rate of 3.26% was up by 0.2% on last year. This will be because of the impact of a higher level of fixed rates being taken. Whilst very competitive the fixed rates are slightly higher than the underlying variable rates but give long term stability of rate for the future.
Regional differences
Whilst the numbers climbed in August the traditional non resident areas in general saw a drop on Julys figures. This included regions like Murcia, The Canaries, Cataluna and Valencia.
Andalucia and the Balearics both saw increases over July.
Total new lending
The number of new loans reached 20,609 in comparison to 18,706 in July. Redemptions feel to 23,426 from 24,250 in the previous month but yet again meant there was a net outflow from the Banks in Spain loan book.