Impact of the lockdown on Spanish Mortgages

You may have read our previous newsletter, written by our Mortgage Adviser Simon Staples on 2nd April, describing how we are finding the situation with respect to COVID-19. The good news is that little has changed since then and the banks are still underwriting mortgage cases (meaning clients can get mortgage approvals) and a number of valuation companies are still visiting properties, generally with positive results up to this point. We’re aware of notaries who are still completing on purchases despite the process has slowed considerably.

In the week following the introduction of the state of emergency in Spain on 14th March, we saw a 67% drop in mortgage enquiries compared to the previous four weeks. The good news is that since then we have seen the number of enquiries steadily increase. Last week the number of enquiries was almost four times the number we received in the first week of the lockdown, so we hope we are seeing the start of what will be a long-term recovery, but clearly nothing can be taken for granted during these times.

Whilst the new enquiries are from clients at the very beginning of the process of potentially buying a property – they may not even be contacting the agents to enquire about properties yet – it is comforting to see people still intend to buy once the coronavirus situation has subsided and are already thinking about finance. We are still encouraging clients to start the mortgage process now, so that they have a mortgage offer ready once they are able to start the viewing process.

We are seeing more enquiries from clients that may previously have been cash buyers who have either seen their share portfolio fall in value or who simply want to hold on to their cash while borrowing is so cheap. We have also seen an increase in clients enquiring about bridging finance on commercial and residential real estate purchases, where clients typically need to borrow for 1-3 years and repay the debt at the end of the term.

Although some investors are buying off-plan or buying via virtual property tours, most buyers – especially those who are buying for personal use – want to visit the properties after the travel ban has been lifted, whenever this may be.

Whilst there are encouraging signs, we do understand that there is uncertainty in the markets in terms of what will happen to house prices and that some clients will want to put their purchases on hold for the time being.

We have been asked a few times recently for our opinion on the banks’ lending criteria and whether we think they will reduce the maximum loan-to-value amounts (to below 70% for non-residents or 80% for residents). Our view is that it is very unlikely that these long-standing maximum borrowing levels will change, especially given that banks didn’t reduce them at all during the global financial crisis of 2007-08 or at any time since then.

One of our Mortgage Advisers, Bozena Brunowska, will shortly be sending out an invitation to a Webinar for clients interested in finding out more about Spanish mortgages. It will be a visual, interactive session, giving clients the opportunity to answer any questions they may have. We will send you the invitation too and you’re welcome to forward it to any clients who you think may be interested.

Source: Mortgage Direct News – April 2020

Maximum LTV

Up to 70 % for non-residents Up to 80 % for residents

Variable interest rates
(non-residents) From Euribor + 1.15% = 1.15%  
Current Euribor -0.294%

Fixed interest rates
From 1.5% for the whole term (20 years). Terms up to 30 years

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