Mortgage Criteria Tightening

In the wake of credit crunch Spanish lenders are being directed by the Bank of Spain to tighten lending criteria and some products are being withdrawn completely while others are being adjusted significantly with higher interest rates and opening commissions etc - hopefully this is a temporary blip but we shall see. The much feted "fees free remortgage" has been withdrawn in the light of new mortgage laws that have been introduced but there is still a product that will pick up some of the costs. We are hopeful the "fees free" will be reintroduced later in the year but I guess its a case of watch this space!!

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Thanks for the update Smiley.

I assume that the "standard" products will just remain as they are and it's just the more "risky" products that are affected?

You know me....not very good when it comes to mortgages....or anything else for that matter

Justin

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Its a shame that the fees fee remortgage products has been temporarily withdrawn particulalry in light of the fact it wasnt for what would be deemed the more riskier clients.  At least Self Certified is still available, even with BankInter pulling their product range.

 

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Some of the lenders are pushing up rates and also opening commissions etc but there is still a good range of products out there but it is without doubt that Bank of Spain directives are starting to be taken more seriously by the lenders with more of them introducing requirements for credit searches etc. - oh and Justin I think youre good with everything - at least so Susan says!!

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I am not a mortage expert but do not those on this forum who are ,think that the credit crunch ,will in 2008 make the very attractive mortgages available at present in Spain become more limited 

And how about 2009

For example in mid 2009 I may be looking for let us say 50% mortgage on a 190.000 € property [ valuation no problem,] 15 years with 5 years interest only

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I think its difficult to give accurate predictions but my expereince tells me that by 2009 the market will have settled, the particular mortgage you would require has a low loan to value and there is absolutely no reason to think that 'minimum risk' lending availability will change.  Now, if you needed 80 or 90% I would not be as confident! However the housing market has seen a major squeeze in the past 12 months with pressure on the valuers to be 'prudent' in their valuations for mortgages, in turn slowing down sales.  In addition, with the major tranche of overseas buyers being UK based and finding their disposable income reducing due to increased interest rates there is a smaller pool of UK buyers.  So on a more positive note, sooner or later the Bank of Spain will see the impact on the economy which is mainly driven by the tourist and building industries and they will attempt to assist the Banks in attracting foreign buyers again, perhaps with lower interest rates, instructions on mortgage initiatives for non residents, less pressure on the valuers etc.  Therefore we could see a more competitive product range available in 2009!

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Thanks

Made a note of your web site may be in touch in due course  

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Penny is absolutely correct in her assessment regarding predictability - in the UK mortgage brokers are used to having advance warning of change of criteria withdrawl of products etc. here in Spain it is far from that in that the lenders will suddenly change conditions and whether they insist on certain compulsory products almost at the drop of a hat or because its Wednesday!

Dont forget Brian that in terms of chargeable interest rate we are not solely dependant upon what happens in Spain as  the ECB is trying to juggle the economies of many different countries - who knows with  the exchange rate where it is  even the UK might be a full member by then  - assuming  Mr Brown goes to referendum (as he promised) and gets the answer he wants (or wanted). There may be instructions from the BOS to lenders regarding directives but my personal view is that the market will need to recover before the BOS initiates more positive influences over the banks - this is a very conservative country when it comes to things like repossession - the Spanish would rather survive on bread and water than miss a mortgage payment so repo is quite an alien thing to them. One of the main reasons for tightening criteria is that every lender (although some more than others) is seeing their bad debt book rise  and defaulters are on the increase - this is principally from the non resident market - one of the reasons for this happening is previous lack of control over valuers and sloppy income checks etc - many offenders also of lending in excess of purchase price so that there is no risk to the buyer in the even the mortgage payments become unsustainable - hence when rates go up and payments rise they walk away - I think any increased flexibility in underwriting whether in 08 or 09 or beyond is going to need to be driven by a rising property market not the other way round - that is precisely what happened with the UK model from 96 to present after the 89-95 collapse - that was in a market that is more open minded about debt and repo - history has a tendency to repeat itself and I believe that is what will happen here.

To be fair I think in light of what has happened the product range here is still pretty good - albeit some of the "non status" lenders have pulled or revised product offerings but its still possible to get 90% of value here in Spain and I think that even if that goes it will be possible to get 80% of value throughout the rest of 08 - unless of course the market does go into tailspin - then again guess there wont be many people applying for mortgages if that happens.

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