The mortgage market in Spain: the crisis caused a major collapse

Kop-Munt,  Friday, 8 September 2017


Anyone who wants to take out a mortgage in Spain walks in at the bank where he has been banking all his life. Mortgage advisors hardly exist, says Patrick Kruger of Spaniards do not compare.

Spaniards remain faithful to what they are used to, the Valencia-based Kruger notices. That's in their culture: if a restaurant is good, you go there every week to eat. If you're banking with a bank, you go there for all your money business,"This loyal mentality is perhaps one of the reasons why the Spanish housing and mortgage market collapsed so hard. Houses in Spain are worth 70% of what they cost in 2007. Mortgage providers have lost more than EUR 350 billion since the crisis struck, according to the European Mortgage Federation (EMF).

Tide begins to turn

In the first quarter of this year, residential mortgages stood out at over EUR 539 billion, a figure that has fallen sharply over the past decade. However, the tide is beginning to turn; in 2015, the number of new mortgages increased by one-third compared to the previous year - and this trend seems to continue this year as well. However, the current mortgage volume is less than 30% of what it was ten years ago. The playing field is clear: the large banks own 91 percent of the mortgage market.

The average interest rate for new mortgages taken out in the first quarter of 2017 is just below two percent. This low-interest rate ensures that 30% of Spaniards who now choose a mortgage will go for a longer fixed-interest period. This is a fundamental change: in 2014, less than one percent opted for a term of more than ten years.

Taxation on mortgage

Spain has no regulations such as mortgage interest relief but instead anticipates an additional tax of about one percent on the mortgage. In Spain, they mainly work with annuity mortgages. When mortgages are taken out in Spain, Kruger experiences more paperwork than in the Netherlands. An additional problem is the communication, especially if you are not proficient in the language. Banks sometimes suddenly want to charge half a percent more interest between the time of the quotation and the actual closing, or change the terms and conditions,"That's where Kruger offers added value for foreign home buyers with

The average Loan-to-value for new mortgage loans in 2015 was 62 per cent, as can be seen from the EMF figures. Only in exceptional cases do banks want to accept a Loan-to-value of more than 80 percent. The bank looks at the purchase price and the appraised value, and then starts from the lowest amount ", Kruger explains. Those who do not live in Spain but want to buy a house here must take into account a Loan-to-value of up to 70%.

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