Pleasantly suprised

 Hi All,

I have just had a mortgage approved from the bank for a client and was really quite shocked at the rates they are offering now....

Banc caja are giving a rate of 3% with an option of an interest only period.

For a 63,000€ mortgage it was 158€ per month interest only for 2 years and for a 15 year term 435€ per month capital and repayment.

While i was in the bank the director mentioned that rates would be even lower by the summer and they are passing the rate drop on to customers....

So as i consider prices in some places are as low as 2002-2003 prices and with mortgage rates coming in lower than rent i feel we may see an increase in demand again........

also, with illegalities almost irradicated we could see a turn in the market.

All we need now is the Uk to sort it's economy out and increase the value of the pound and i could see people returning to Spain to buy in real numbers again.

We are now getting nice apartments at the 60k mark which surely is a sign that the market is at its lowest point.

What do you think...........

I think someone earning €1000 per month may feel, in the light of all that has happened around the world in the last year or so, that borrowing over 5 times their income is, after all, not such a good idea. Especially when jobs are not secure, and hard to come by.

On the other hand, the recession, depression, whatever you want to call it, won't last for ever, and neither will people's memories, and greed seems to be a very powerful human emotion, so I suppose it won't be too long before things start moving again!

Just wondering if the bank made your clients take out a life insurance policy with the mortgage.

Thanks

Alyson

 Hi Alyson,

I was always under the impression that it is mandatory to have life assurance with a Spanish Mortgage,whether you have to use the bank to do this i am not 100% sure............

Roberto,

I know what you mean but as we sell to very few Spanish clients, our market seems to be based on the foreign buyers with Higher incomes..although we are based in a Typical Spanish village, from speaking to friends most of them do not use foreign agents anyway and use word of mouth or never seem to move...not in our village anyway....

I was wondering if anyone knew if I could assign a UK life assurance policy to my mortgage with Banc Caja, its not finialised yet, just agreed in principle.  Looking at earlier posts, people seem to be paying a heck of a lot for life assurance in Spain compared to the UK.

Thanks

Alyson

Georgia, I understand where you're coming from. My answer was obviously with a view to the wider (Spanish) market. I admire your optimism and I hope you're right, but I'm not so sure. Until the ex-rate changes dramatically, buyers from the UK and Scandinavia are going to be put off buying anywhere in the eurozone, and if that doesn't put them off, poor rental returns (if any) may do the trick. The average wage / average house price ratio to which I referred is getting increasing coverage in the press, which will no doubt serve to convince many that the bottom is a long way off yet, and therefore make people want to wait to see where prices go. And finally, even if banks are willing to grant a mortgage (at whatever rate), even high earners are likely to be more cautious than ever about taking on additional debts in the current climate, and a second home is a luxury that most people are prepared to compromise on.

I was talking to my bank (BBVA) this morning, and the branch has granted precisely two new mortgages so far this year. They averaged 5 or 6 a month last year. It wasn't clear whether this was due to the fall in applications, or because their lending criteria is so much stricter, but they did say they won't normally consider new clients, only re-mortgages for existing clients.

Hi Alyson

We did ours with banco Halifax and weren't asked to take out life insurance with them.

We took out our life insurance with Legal & General and our mortgage with GE. A condition of the mortgage was life insurance, but we didn't have to provide proof of it.

Mark

Going back to Georgia's original theme - if I may - of low interest rates and banks passing them on, coupled with low prices........

I saw a studio advertised today in the building next door to me for €60,000. Needs renovating no doubt, but nevertheless, that's the cheapest I've seen one (apart from in buildings which aren't safe to go near, let alone buy property in) in this part of the world for probably 7 years or more. A couple of years ago, I would have expected such a proprety to fetch around €400 a month on a long term let. Now, I think you'd have to hope for €350 - but there's a lot of competition. If (big IF) you could get 350, and if (even bigger IF) you can find decent tennants who pay every month, that would represent a gross return of 7% on your 60k. A much better return than you'll get in the bank.

So am I tempted? Well, no, not really. Fortunately, I tied into a fixed rate of over 5% with my bank which is good until September, and with markets so volatile still, who knows what will happen between now and then? Maybe interest rates will pick up. Maybe property prices will drop more. The point is, even with seemingly bargain prices appearing, and record low borrowing rates / returns on deposits, a lot of people, like me, are nervous. And that's why I don't think there'll be any significant pick up in the property sector for a good while yet.

On a positive note, I queried (strongly!) yesterday why my bank had charged me 0.45€ for each ATM withdrawal on my latest statement, when the ATM itself proudly informs me each time that there will be no charge for the transaction. I have for a long time had an arrangement whereby "normal" charges for depositing cheques and issuing bankers drafts etc. are waived, but in their embarassment over the ATM charges (refunded), they have now waived all future maintenance charges, card fees and transaction fees on my account! It seems that some banks are at least a little bit keen to hang on to some of their depositors. Maybe they will see fit to extend my >5% deal when it matures???

Georgia,

can you get a fix mortgage with such low interest rate? For how long maximum?

thanks

Ana

The reason BBVA have only completed a few mortgages is probably down to their maximum loan to value being around 60%, the problem for brits purchasing in Spain is that when you consider most lenders require currently at least a 30% deposit the purchaser then has on top,

all purchasing costs inc of iva etc 12.7% approx

furnishings etc                                5% so when added to the 30% deposit they are in for around 47% which for those who purchase as second homes  is a considerable amount upfront.

Georgia was your client non resident and what was the loan to value as it is a very good rate.

In regard to should one purchase at present..........all opinion but for most people their main residence has been the best investment that they have ever made.

Take the studio mentioned by Roberto,

if one managed to purchase and irrespective of rental income hang on to it for long enough they would undoubtedly make a profit in the long run,

Current residential property yields in the UK are around 4.75-5%pa, commercial yields are still obtainable at around 7-10%, the difference being that simply larger deposits are required for commercial purchases.

Re life assurance- it is not a condition of the mortgage with many spanish banks however if they can sell it they will accumulate browny points towards targets, bonuses etc the same as the banks in the UK.

For any ex pats there are many offshore well known subsidiary companies that will offer life cover etc.

"for most people their main residence has been the best investment that they have ever made."

Is your main residence an investment? Surely it's a home first and foremost? I've never quite seen how you can "make a profit" on your principle residence, except by downsizing or moving to a cheaper area.

If you can get a great mortgage deal, and are confident the market has reached the bottom, yes, it's a good time to buy.

Roberto

in my opinion ones main residence is an investment as one is purchasing it, also many have used the equity in it / from it to purchase other goods.

You could make a profit by purchasing it in a low market, selling it in a high market and then biding your time and repurchasing again in a low market.

As to "the right time to buy" sadly human nature dictates greed so most will wait and wait and then realise they should have purchased 3 months ago, however irrespective of when one purchases as they are no longer making land supply and demand will still apply however once again dependant upon where you purchased in the first place.

From a UK tax perspective ones main residence has been tax advantages if selling over and above secondary or pure investment properties.

My understanding of an investment is something entered into purely with profit as the main objective. I don't think that's the main criteria on people's agenda when purchasing their main home. Yes, theoretically you can profit by buying low and selling high, then waiting for prices to drop and buying low again, but in the meantime you need somewhere to live, and the rent you pay could wipe out your profit. In certain conditions, this strategy could work, but where and when people move home is more often than not dictated by factors other than market movements. Growing families or job changes don't usually take into consideration such things!  Using the equity in your property to purchase other goods implies to me increased debt rather than profit.

As for tax advantages etc. that stuff's beyond me. See my signature! If you're talking about capital gains tax though, same applies in Spain, but only if you re"invest" the sale proceeds, which  if it's your main home you probably will anyway because you're not looking for a profit, you're just moving home. If you buy purely for investment (profit) you factor in the tax issue.