After seven years in the depths of a crisis the Spanish property market has started to recover and it appears the recovery brings new types of offers with it.
While Spanish banks have preferred variable-rate mortgages for a long time, they now are starting to offer fixed-rate products, providing local buyers with more options, according to Spanish property portal Kyero.com.
Given that the average interest on Spanish mortgage products stood at 3.5 per cent at the end of 2014, a fixed-rate loan at below 4 per cent seems like an offer worth the buyers’ consideration.
At the start of 2015, Banco Sabadell, which recently launched a takeover offer for UK lender TSB, as well as CaixaBank launched a few long-term fixed-rate mortagges. Banco Sabadell introduced a 3.95 per cent fixed rate product with a 30-year term and another 15-year mortgage, fixed at 3.5 per cent. CaixaBank put a new 10-year fixed mortgage range on the market with rates ranging from 2.5 to 3 per cent, said Kyero, citing information of Mexican business and economics newspaper El Economista.
The paper also quoted estimates that 20 per cent of all Banco Sabadell’s new mortgages this year will be fixed rate loans.
Currently, 90 per cent of all mortgages in Spain are on a variable interest rate, the majority of which are based on the Euribor.
Loans are usually based either on the purchase price of the property or on its value depending on which of the two is lowest. In terms of loan-to-value (LTV) sizes, 70 per cent is typical for non-resident buyers, while resident buyers are mostly taking out mortgages at 80 per cent LTV.
Expert analysis of the Spanish mortgage market
Mortgage Direct, an independent mortgage broker operating in Spain, provides an interesting perspective on the local market.
Founders Katherine Walkerdine and Kevin Monger both have long-term experience in the UK as well as Spain and are still advising clients on a day-to-day basis.
Monger spoke with Kyero about the changes the mortgage market in Spain is experiencing currently.
Q: The mortgage market is heating up, with more options for house buyers. Would you agree with this?
A: The market is definitely heating up. Banks are very keen to lend, so inevitably they have become more flexible and are offering better conditions. The conditions we can offer our non-resident clients are now quite similar to those we can offer to Spanish residents/nationals, which is unprecedented in our experience.
Q: Have you seen your lenders switching from the traditional variable rate to a fixed rate?
A: Lenders have always offered both variable and fixed rates. Variable rates have improved dramatically over the last 12 months and fixed rates have also fallen, but not to the same extent. Nevertheless, fixed rates are starting to look more attractive and we do expect the take-up rate to increase, but not dramatically and bear in mind that over 95 per cent of mortgages signed in Spain are with a variable rate.
Q: Do you believe this will help encourage sales in Spain?
A: No, we do not believe the fixed rates are attractive enough to persuade significant numbers of new buyers to opt for them, thereby increasing sales. Fixed rates in many cases are currently more than 2 per cent higher than the corresponding variable rates (4+ per cent v 2 per cent).
Q: In your opinion is a fixed rate mortgage better for most home buyers in Spain?
A: Generally-speaking, not with the variable rates on offer currently, no.
Q: Is there a trend in the age group of buyers that are looking at the fixed rate mortgage?
A: We have not noticed any trend to do with age groups to be honest. We do notice that a lot of clients from France and French-speakers from Belgium and Switzerland ask about fixed rates and interest rate caps. Fixed rate mortgages are more prevalent in these countries compared to Spain. Of course, fixed rates are also popular and widely available in the UK, but Spanish banks have never offered very low fixed rates, even now with the Euribor at its lowest ever level. We do hear that things may be changing, but we have yet to see the evidence.
Q: Is there a trend in the types of houses that are being considered for fixed rate?
A: Not that we are aware of.
Q: Rapidly changing interest rates in the past meant that an average monthly mortgage payment could vary by hundreds of euros per month. Were these extremes seen regularly in Spain over the past 5 years?
A: There have been some rapid changes to the Euribor during its brief history, that is very true. The last dramatic change occurred at the end of 2009, when the Euribor dropped from around 5 per cent to 0.5 per cent by the middle of 2010. Since then, the Euribor has not risen above 1.5 per cent and for the last few years has remained well below 0.5 per cent.
Q: Have you looked at the new Google mortgage comparison tool? Do you think they will become a contender in the future?
A: This looks like another useful comparison tool. One would expect that if a company with the resources that Google has at its disposal wishes to enter the comparison tool market, they could easily become one of the main players.
Q: Do you see the Google tool coming to Spain?
A: I would say it is not likely in the foreseeable future, but 5 years down the road, who knows. Mortgages for non-residents are not straightforward and the conditions are not set in stone with banks, so it would actually be impossible to make a comparison tool relevant. For example, we offer exclusive conditions to our clients, which are not available if they go direct. In addition, if a foreign client goes directly to three different branches of the same bank in Spain, they are likely to be quoted three different rates. Where would you start with a comparison tool?
Q: Are these fixed rate mortgages available for overseas buyers as well as Spanish nationals?
A: Yes, but the rates are less attractive for overseas buyers than for nationals, which is the same for overseas buyers buying in other countries.
Q: And if so, do you think their availability will encourage more overseas buyers in 2015?
A: The number of overseas buyers coming to Spain is very high at the moment, but this is due to a number of important factors, including low prices, favourable exchange rates and low variable interest rates. The fixed rates are not as attractive as the variable rates, but if lower fixed rates do become available then, yes, we would definitely expect this to encourage even more overseas buyers.
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