Euribor rate falls

April 3, 2012 – 11:29 am

Spain's Euribor rate falls, causing mortgage costs to fall in Tenerife

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell to 1.45pc in March, leaving it 25pc lower than the same time last year. As a result, repayments on a typical 25-year, €120,000-mortgage resetting now will go down by around €25/month or €300/year.

Mortgage rates are plunging because of the new policy by the European Central Bank (ECB) to provide banks with unlimited funding for 3 years. None of this means cheap credit for mortgage borrowers.  When banks can only get short-term (3-year) financing, they avoid lending to house-buyers for 25 years.

Partly as a consequence, new mortgage lending in Spain has collapsed, down in January an annualised 41pc by volume, and 47pc by value, with the average mortgage value down 10pc.  It’s clear Spain is back in a credit crunch.

So mortgage rates have plunged, but so has new lending. The result is less money available to buy housing, which means downward pressure on prices.

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Euribor down,mortgages cheaper?

March 5, 2012 – 12:16 pm

Euribor falls again in Spain and Tenerife

Euribor,(12 months), the interest rate typically used to calculate mortgage repayments in Spain, fell to 1.678pc in February, leaving it 2.1pc lower than the same time last year. This is the first time that annualised Euribor has turned negative in 19 months. As a result, repayments on the average 25-year, €150,000-mortgage resetting now will go down by around €36/year.

This time last year Euribor was still rising fast as the European Central Bank (ECB) tightened monetary conditions. The Euribor has been on a downward trend since August last year and shows no sign of changing direction, 

Rates will stay low whilst the ECB keeps up it’s unlimited lending policy, giving banks 3-year financing in return for dubious collateral. Unfortunately, this does not mean cheap credit for mortgage borrowers. Quite the opposite. When banks can only get short-term (3 year) financing, they avoid lending to house-buyers for 25 years.

Partly as a consequence, new mortgage lending in Spain has collapsed, down 32.6pc in 2011 (to 409,337)  the biggest annual fall since the crisis began  according to figures from the National Statistics Institute (INE). The overall value of new mortgage lending fell 35.5pc to €45.8 billion, and the average mortgage loan fell 4.3pc to €111,950, at an average interest rate of 4.35pc, up 11.54pc on 2010.

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First signs of growth in Spain’s real estate market

March 2, 2012 – 9:54 am

Investors are starting to look at Spanish property again says José Manuel Entrecanales (pictured above), the President of Acciona, one of Spain’s biggest companies

“Investor interest in Spain is starting to grow again, even in the real estate sector,” said Entrecanales, President of Acciona, at a press conference for the company’s 2011 results. Acciona is a massive international corporation and leader in power generation, and also has a real estate division in Spain.

Entrecanales said he sensed a “note of optimism,” without denying that “the immediate situation is worrying.” Growing optimism might be a sign that “asset prices in Spain have touched bottom,” in part thanks to “the political stability after the change of Government creating stable expectations for the coming years.”

Entrecanales explained that in the last few months he has seen more interest in Spain from investors from all over the world, including North and South America and Asia.

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Developers ask government for mortgage interest tax relief on holiday homes

February 1, 2012 – 11:51 am

Developers ask for reduction of tax on properties in Spain and Tenerife

The G14 association of Spain’s leading developers says it will ask the Government to introduce mortgage interest tax relief on holiday homes to stimulate demand and deal with Spain’s   empty new holiday homes on the coast.

The Government has just reintroduced mortgage interest tax relief on main homes, despite the fact that it favours owner-occupiers at the expense of those who rent, and makes it harder for Spain to reach its stated goal of increasing the rental market. Developers want a similar tax break for holiday homes.

Some industry voices like Antonio Carroza  have wasted no time in describing the request as “irresponsible”. He believes it is wrong to use public money to subsidise “large developers so they can sell second homes that should never have been built,” he said, quoted in the Spanish press. In any event the tax relief would only apply to Spanish residents, not foreigners buying holiday homes in Spain and Tenerife.

The G14 has also called on the Government to reduce the ITP sales tax on resale properties.

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Euribor rate falls for fourth month in a row

January 4, 2012 – 11:40 am

Euribor down again which means mortgage repayments up in Spain and Tenerife

Euribor, (12 months), the interest rate typically used to calculate mortgage repayments in Spain, fell for the fourth month in a row to end the year at 2.01, a percentage fall of 1.7pc on the previous month. Compared to the 12 months ago, however, Euribor rose by 33.4pc, meaning higher mortgage repayments for all those on annually resetting mortgages.

The European Central Bank (ECB) cut base rates from 1.25 to 1.00 during December, the second cut in 2 months since the Italian Mario Draghi took over as the new Governor. Markets were expecting the cut, and judging by Euribor’s recent trend do not expect rates to increase any time soon. As you can see from the following chart, Eurozone base rates are still significantly higher then the US, the UK, and Japan.

New mortgage lending continued to shrink in October, with new mortgage approvals down 43pc to 23,193 (and down 46.5pc by value), according to figures from the INE. It’s clear the credit crunch is well and truly back in Spain.

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Euribor Rate

December 5, 2011 – 10:58 am

Euribor down again which means mortgage repayments up in Spain and Tenerife

Euribor(12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell for the third month in a row to 2.044pc in November, a percentage fall of -3.1pc on the previous month.

After rising abruptly in the first quarter of the year, Euribor has been stable or declining since May in expectation of a cut in the base rate.

Mario Draghi, the new Governor of the European Central Bank (ECB), announced a cut in base rates of a quarter of a point to 1.25% just a few days after taking over from Trichet at the beginning of November. In the face of alarming economic headwinds, markets expect the ECB to cut the base rate even further, hence the fall in Euribor.

When the Euribor goes  down, mortgage payments  go up.The fall in Euribor will not be much immediate comfort for those with an annually resetting mortgage. Euribor is now 33pc higher than it was 12 months ago, meaning repayments on the average mortgage will rise by 400 Euros/year.

The Credit Crunch is back in Spain with a vengeance. New mortgage lending fell 42pc in September year-on-year (to 30,808), and the average value fell 6pc to €111,934, according to figures from the Statistics Institute (INE). Lower mortgage lending = less money chasing homes , downward pressure on prices and more bad news for vendors.

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Euribor rate falls again.

October 17, 2011 – 12:31 pm

Euribor rate falls again affecting property sales in Tenerife

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell for the second month in a row to 2.067pc in September, a percentage fall of -1.4pc on the previous month.

The rise of Euribor seems to have topped out, at least for the time being. With markets still fretting about a European debt crisis, expectations of rising interest rates have fallen, taking the heat off Euribor rates. The European Central Bank has said it has no plans to raise (or cut) the base-rate any further. It now stands at 1.5pc.

The monthly fall will not be much comfort for those with an annually resetting mortgage. Euribor is now 45.6pc higher than it was 12 months ago, meaning repayments on the average mortgage will rise by 480 Euros/year.  It was way too low between 2002 and 2006, sparking off an insane boom in Spanish real estate. It rose in 2007-2008 as other European economies and inflation started to grow too fast , but was slashed in 2009 to head of a depression. It made a feeble attempt to rise again this year, but that has run out of steam with the economy. It is now back around 2pc – way below what it should be in normal times.

But right now the problem is not so much the Euribor rate, which is historically low,  it is that banks don’t seem to want to lend at any rate, starving the housing market of credit without which it cannot recover.

New mortgage lending fell 47pc in July (to 29,523) compared to the same month last year, the lowest level recorded since this data series started in 2003.

The average residential mortgage value was €110,604, 9pc down on last year. All of which means less money around to fuel demand for Spanish property, putting further downward pressure on prices.

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Spain eases conditions for those with mortgage problems

July 21, 2011 – 2:46 pm

Spanish mortgages problems may be eased?

Spain will ease conditions for people who can’t pay their mortgages as floating interest rates rise and unemployment remains the highest in the European Union, the government said on Thursday.

Interior Minister Alfredo Perez Rubalcaba said the government will decree  a new and higher limit on the amount banks can legally deduct from the wages of a mortgage holder in default.

The government is contemplating other new rules to protect homeowners four years after a property bubble burst leaving many Spaniards stuck in homes worth much less than what they owe the bank.

“Indignados” or “indignant” protests around Spain in recent months have called on the government to address the plight of borrowers who can be evicted by the banks but still owe the entire amount of their mortgage even though the bank now owns their home.

Source: Reuters.com

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Euribor rate falls a fraction in June

July 5, 2011 – 10:00 am

Euribor rate falls . Properties in Tenerife and Spain will cost more if mortgage rates are set now

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell a fraction to 2.144pc in June, a percentage change of just -0.1pc on the previous month.

On an annualised basis, Euribor is now 67pc higher than it was a year ago, meaning higher monthly repayments for borrowers with mortgages resetting now.

Repayments for a typical mortgage (150,000 Euros, 25 years) will go up by around 61 Euros /month, or 741 Euros / year. That will punish many a stretched household budget in Spain.

In other mortgage news, new mortgage registrations dived an astonishing 38pc YOY in April to 31,358,, according to the National Institute of Statistics (INE). The average mortgage value fell by 3.8pc. That came on top of a 20pc fall in March. Lending is at all-time lows, which is bad news for the housing market.

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Standard and Poor’s property ratings

May 25, 2011 – 9:58 am

 

Standard and Poor's ratings of Tenerife and Spanish property.

Standard & Poor’s, a ratings agency state that prices  are to continue falling over the next 12-18 months but not dramatically. Transactions  are expected to continue their modest recuperation. They say it will take “several more years to completely absorb the excess supply.”

BBVA, a Spanish bank: Price falls of 10pc on average in 2011, on top of falls of up to 50pc already accumulated on the coast. BBVA say holiday-homes on the coast fell 20pc in value last year.

The Valencian Institute of Economic Research (IVIE): Price falls of 12pc on average in 2011, on top of a fall of 20pc accumulated since 2008. Spain’s chunky glut of homes and rising interest rates will keep prices going down for the time being, argue this Valencian outfit.

Illustrating IVIE’s point about prices falling more in real terms, the ups and downs of prices since 1985, in both nominal and real (inflation adjusted) terms. After inflation, prices are back to where they were in 2003 / 2004, but they still have further to fall.

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