Wednesday, November 14, 2007

The boy in the bubble

An interesting article about the Spanish property bubble that is not all doom and gloom. Also reiterates Spain's high ranking holiday destination status. It's the best weather in Europe and nothing is going to change that. For more on Spanish mortgages go to

The property bubble and its subsequent deflation is not a crisis limited to the United States; many countries now teeter on the brink of a market collapse. In Spain, a decade-long boom—which led the country to construct more new houses in 2006 than France, Germany and the United Kingdom combined—has begun a reversal and given many homebuyers and sellers cause for alarm.
Home prices have risen more than 200 percent during the ten-year bubble marketThe price of Spanish homes has risen more than 200 percent during the past 10 years, and “[a]t the height of the construction boom in 2005 there were 7,000 estate agents on the Costa Blanca,” according to the Daily Telegraph. Low mortgage rates offset the rising costs of home purchases and now approximately 95 percent of Spanish homeowners have adjustable rate mortgages, according to the Wall Street Journal.

Change to interest-only, go to

"Last year, Spanish families on average paid six times their annual salary to buy a home, compared with 3½ times salary in the late 1990s, according to the Bank of Spain, the central bank,” the Wall Street Journal reported.
However, the Spanish property bubble has popped. In the second quarter of 2007, the rise of property prices was below the rate of inflation for the first time in 10 years. So far this year, 300 of the Costa Blanca’s real estate offices have closed their doors, according to the Daily Telegraph. Spanish homeowners, unable or unwilling to sell, must watch in horror as interest rates rise beyond their reach.

Change to interest-only, go to

“In the third quarter, 22 percent of banks surveyed by the European Central Bank reported that they were tightening standards for mortgages, with 10 percent easing and the rest unchanged,” according to the Wall Street Journal.
The situation in Spain could be either detrimental or beneficial to investors involved with Spanish property. Those who own real estate in Spain could see their property values falling as the market struggles. Speculative investors buying and flipping properties stand to get hit especially hard and will most likely look to offload properties at a loss.
Still an attractive tourist destination, Spain remains an excellent location to own rental propertiesFor investors who do not own Spanish property, but are interested in the possibility, the country’s market could offer opportunities. In the near future it may be possible for investors to secure Spanish real estate for lower prices because of the sagging market and anxious sellers. However, it is unlikely that the market has bottomed out yet, so investors looking to buy should exercise caution. Those with long-term plans or those buying for personal use will find this market more attractive than those interested in the short term.

Change to interest-only, go to

Spain is one of the most popular vacation spots in the world among Americans; it was ranked ninth in 2007 and has been among the top 15 international destinations since 1998, according to a Harris Poll released July 2. Spain will likely remain a popular destination in the future, so it is an excellent location for a second home or vacation rental property in spite of its deflated real estate bubble.

Tuesday, November 13, 2007

Cyprus Mortgage Rates

NICOSIA, Nov 12 (Reuters) - Cyprus kept the key refinancing rate unchanged at 4.5 percent on Monday, deferring its compulsory alignment with lower euro zone rates until December.
With the European Central Bank expected to keep its main interest rate at 4.0 percent into next year, Cyprus must either cut its borrowing costs by 50 basis points when its central bank meets on Dec. 10, or slip into ECB rates by default when the island adopts the euro on Jan. 1.
"We will decide how to do it at our next meeting," Cyprus Central Bank governor Athanasios Orphanides told reporters.
"It really doesn't make much of a difference to Cyprus if we change (rates) on the day of the meeting or wait until the end of the year ... A three week time frame will not make much difference," he said after a meeting of the rate-setting Monetary Policy Committee (MPC).
Cyprus has not changed its rates for more than a year. The ECB had been expected to raise euro zone rates towards the Cyprus level until turmoil broke out on global financial markets in August, forcing the ECB to suspend its tightening campaign.
The Cyprus Lombard rate will stay at 5.0 percent and the overnight deposit facility rate at 3.0 percent, said Orphanides, who will join the ECB's Governing Council in January. Financial markets had not expected any change.
"(The Central Bank) wants to keep rates as high as possible for as long as possible," said economist Marios Mavrides. "However, even if they reduced them now, it would make no difference. For Cyprus the current Cyprus interest rates are no longer relevant, but those of the ECB are."
The Central Bank is worried that excessive credit is feeding into inflation and stoking property prices. Consumer prices rose 2.99 percent year-on-year in October, up from 2.6 in September. In the past year home prices have increased more than 10 percent.
Authorities asked commercial banks to limit mortgage lending earlier this year. "If loans continue at the same pace the rate of growth in credit will exceed 40 percent by the end of the year," said Orphanides. "However I do not think the same rapid expansion rates will continue."

For mortgages and remortgages in Cyprus visit

Friday, November 2, 2007

Our house, in the middle of our street

Here in Spain we don't really have much of a sub-prime mortgage market. The only loans where you can self-certificate your income have pretty low Loan-to-values, like 50% or 60%.

For the holiday apartment boom along the coastal areas, many of these units have been bought by non-residents, so the LTV's were generally not more than 70 or 80%

So anyone that has bought over the past few years of price increases, should still have a chunk of equity in the property. Even if people have a few problems making the payments, during a period of higher interest rates, then it would take a substantial fall in the market for these properties to have negative equity. That is, the loan being higher than the value.

Past history has shown us that even with negative equity, the long term prospects for property is that it increases in value. So hang in there. If you want to switch to interest-only and save a bit of cashflow, visit us at and make an enquiry.


The Exorcist

Reposted from Bloomberg

Nov. 1 (Bloomberg) -- As the U.S. real-estate crash worsens, thoughts in Europe are turning to how bad the housing markets might get in Spain, Ireland and the U.K., where booms are also deflating fast.
Don't panic. While the go-go days are probably over, there's little evidence yet that the return of some semblance of sanity to European property prices imperils the outlook for growth in the same way as the U.S. meltdown might crimp the world's biggest economy.
There are certainly some worrying signs of weakness in Europe. Mortgage arrears, or delinquencies, are climbing, based on an analysis of the third-quarter performance of European mortgage-backed bonds by credit-rating company Fitch Inc.
Arrears in Spain, for example, surged almost 31 percent in the third quarter from the previous three months, although the overall percentage of borrowers at least three months behind in their payments is still low at 0.34 percent.
``The highest arrears are being seen in transactions from 2006, backed by high loan-to-value loans from specialist lenders,'' Fitch said. ``More recent vintages are expected to see higher arrears and defaults in future.''
The U.K. market saw the second-biggest jump in arrears, with late payments on so-called non-conforming mortgages -- those with non-standard characteristics, similar to Alternative-A loans in the U.S. -- jumping 7.7 percent. Arrears rose 4.9 percent in Italy, 2.7 percent in Ireland, and 2.4 percent in Germany.
Raising Rates
``In all jurisdictions, the effects of central bank interest-rate rises are being seen through increased arrears levels,'' Fitch said. The European Central Bank's benchmark rate has doubled to 4 percent in the past two years, while the Bank of England raised its key rate to 5.75 percent from 4.5 percent in the same period.
In Spain, the euro region's fourth-biggest economy, prices are still rising, though at a third of the rate seen two years ago. House values climbed 5.3 percent in the third quarter from the second, down from an average gain of almost 11 percent in 2006 and below the 15.5 percent increase in the first quarter of 2005, the earliest period for which figures are available.
Even a ``cautious'' analysis suggests prices are overvalued by about 30 percent, according to a Deutsche Bank AG study published last week by London-based economist Susana Garcia- Cervero and Madrid-based analyst Daniel Gandoy Lopez.
Money Markets
Fixed-rate mortgages account for less than 1 percent of the Spanish market, the report said. Most home loans are tied to 12- month euro money market rates, which have surged to about 4.6 percent currently, from 3.85 percent a year ago and less than 2 percent in mid-2003.
``We calculate that even under very conservative assumptions, from 2007 the economy could face a cumulative loss of almost 7 percent of gross domestic product,'' the Deutsche Bank authors wrote. Construction accounts for about 11 percent of the Spanish economy. Still, a recession in Spain is ``a rather unlikely scenario in the next 18 months,'' they said.
In Ireland, house prices dropped 1.9 percent in August and 0.7 percent in July, the first declines in at least 10 years, halting a boom that saw values climb 9.5 percent in February, 7.4 percent in March and 5.1 percent in April. Mortgage lending, meantime, grew an annual 16.1 percent in September, the slowest pace in a decade.
``The notion that Irish housing activity is in the throes of a serious slowdown which will cause a large drop in employment in the construction sector with adverse consequences for growth in the wider economy is now virtually an article of faith,'' Dermot O'Brien, chief economist at NCB Stockbrokers in Dublin, wrote in a research report last month.
Labor Market
Ireland's unemployment rate ticked higher, to 4.7 percent, in September from an average of 4.6 percent in the second quarter, leaving it well below its 20-year average of 9.4 percent and in line with its five-year average of 4.5 percent. Construction accounts for about 12 percent of the economy, with new housing contributing about 6.5 percent.
A collapse in the construction industry would suggest the labor market should have had a much faster pace of job losses, O'Brien wrote. ``The scenario in which a lower level of housing activity punches a big hole in the Irish growth story is untenable,'' he wrote.
In the U.K., figures showed house prices falling for the first time in two years last month. Research group Hometrack Ltd. said this week that the average cost of a home in England and Wales declined 0.1 percent from September.
Banking Bonuses
The drop, though, mostly reflects waning demand in central London, where banking bonuses have driven prices sky-high in recent years. The Council for Mortgage Lenders predicts U.K. prices will still grow next year, albeit by just 1 percent compared with 7 percent this year.
``Ireland and Spain will take the most significant direct hits, while the U.K.'s more diversified economy, which is currently experiencing a less stark moderation in house-price and construction-sector growth, should weather the storm to a greater degree,'' Trevor Cullinan, a sovereign credit analyst at Standard & Poor's in London, wrote in a report last month.
The word ``decoupling'' will be bandied about a lot in the coming months as economists debate the implications of a U.S. slowdown for the rest of the world. In Europe, at least, the outlook for the housing market doesn't threaten to invoke the ghost of recession, no matter how bad the U.S. story gets.

Tuesday, October 30, 2007

Fistful of Dollars

Taken from, bit of business news from Spain, including a reduction in the Euribor rate at last, and mention of the appalling minimum wage in Spain.

Spanish company Ferrovial has announced a 142% hike in profits for the year to September compared to last year. The number comes in at more than 800 million €, thanks to the integration of the British Airports Authority and plusvalías on deals resulting from the sales of the company’s interests in the airports of Sydney and Budapest.The numbers are good for the company although there was no increase in profits from the construction sector.Nearly two parts of the Ferrovial business is now generated outside Spain.

The Euribor rate, the interest rate used by banks to set mortgages has finally fallen after two years of consecutive monthly rises.The rate is expected to end the month of October around 4.64%, certainly lower than the September figure of 4.725%.Despite the news families who see their mortgage rate readjusted on an annual basis in October will still have to tighten their belts.

There is a debate in economic circles as to the effects of the Prime Minister’s promise of a large increase in the minimum wage in Spain. Even the economists cannot, it seems, agree on the effect on the economy.The current wage is 570, 60 Euros, and the Government has proposed an 8% increase in that annually over the next 8 years, taking it to 816.5 € in 2012.The Partido Popular have attacked the promise, claiming that an increase would affect inflation and unemployment.However the debate is largely theoretical, given that less than 1% of workers in Spain are on the legal minimum.

The Parquesol real estate company has announced a 48% fall in profits for the year to September, coming in at 24.8 million € following a fall in sales. The company spent 43 million € buying land in Madrid, Cádiz and Málaga. Income from rentals was up 15% at 15.4 million €.El País reports today that Spanish companies have 6 billion € legally lodged in accounts in financial havens over the past ten years. The Caymen Islands and Panama are the two areas preferred by the Spanish to avoid taxes, followed by the Virgen Islands and Bermuda. The data comes from the Foreign Investment Society, which is dependent on the Ministry for Industry. Nearly 80% of the money found in such places are investments which are from financial services, or holdings. The latest OECD report, two weeks ago, drew attention to the levels of international fiscal fraud.The Madrid market has today consolidated its position above the 15,700 points level, following similar gains seen in European markets. The main players such as Repsol, BBVA and Santander are all up more than 1% on the day.It comes as oil prices have continued to rise and are now close to 90 dollars a barrel.

Monday, October 29, 2007

The Abyss

Am reposting this story from the Daily Telegraph in the UK. Seems like it's pretty much bad news as most of Europe teeters on the brink of financial collapse. Still, apparently it's good news for the German's, which seems to imply that the rest of Europe can blame Germany, again!

Not many financial stories have the ability to make me laugh out loud, but this line did : "That German voters were never asked whether they wished to fold their prize into a peseta-lira porridge makes the issue even more neuralgic." Marvellous.

All animals are equal in the one-size-fits-all monetary system of the euro, but some are more equal than others. Germany is supremely equal. It is now up on hind legs.
Or in the words of Italy's financial daily Il Sole, Berlin has "declared war" on southern Europe by refusing to back desperate pleas for a weaker euro – by which is meant a tilt towards looser monetary policy. Indeed, it is strangling such efforts.

Germany's post-1990s mini-slump delayed this showdown but delay has merely made matters worse. Loose money for German needs caused Latin booms to get out of hand. Now those booms are over and Germany is resurgent.
The clash is a foreseeable result of strapping together Europe's two ancient cultures – each with different wage systems, trade patterns, economic cycles and sensitivities to interest rates – in a premature currency union without a central treasury. And doing so in an entirely political bid to force the pace of EU federalism, against the warnings of the European Commission's economists.
Germany has clawed back 40pc in labour-cost competitiveness against Italy, 30pc viz Spain and 20pc viz France since the currencies were fixed (Eurostat data). This was done by hard work or – depending on your view – by squeezing wages in a beggar-thy-neighbour strategy to snatch market share from the rest of euroland. The truth lies between the two.
Italy has held up better than feared. Or at least, the Ostrogoth "Republic of Padania" above the Po is holding up. Fiat has silenced critics. But there are limits as the euro stalks $1.44 against the dollar and screams to mad highs against the Asian mercantilists. "What really worries us is new orders," said Francesco Peghin, head of Padova's business league.
"The euro has risen 60pc against the dollar since 2001. Until now companies have held share by squeezing margins but it's no longer possible at this level.
"A strong currency is one thing. It is quite another when the exchange rate completely decouples from the real economy," he said.
France is slowly bleeding. House prices are falling. In the Jura – Europe's toy-making capital – Smoby-Majorette has just gone bust, undercut by Chinese imports. Nearby, car-parts group Manzoni-Bouchot has suffered the same fate.
The big names are shielded by currency hedges but these become ever more costly to roll over. "The euro has become a terrible handicap," said Peugeot-Citroën's Christian Streiff.
As President Nicolas Sarkozy knows, it takes a year or two for currency effects to feed through and the victims draw political sympathy. Hence his daily broadsides against the European Central Bank: liquidity spigot for "speculators" but foe of working people.
Germany is in another world. Its August trade surplus was $19.8bn and, a paragon of fiscal virtue once again, it is becoming bossy. Finance minister Peer Steinbrück unwisely makes cisalpine enemies as if it were sport.
Whatever the theory of EMU, everybody knows that the German people gave up the Deutsche Mark and the revered Bundesbank under an implicit contract that their country would never face inflation.
That German voters were never asked whether they wished to fold their prize into a peseta-lira porridge makes the issue even more neuralgic. Yet inflation is what Germany now faces. It reached 2.7pc in September, hitting milk, butter, bread and fuel.
Bundesbank chief Axel Weber is breathing fire. "By the end of the year, inflation in Germany could increase to 3pc. As a central bank we are really concerned," he said.
"Monetary policy can't lose sight of its primary mandate – even if that means no longer supporting a robust economy."
The teutonic bloc of Austria, the Netherlands and Finland is behind him, alarmed by M3 money supply growth racing ahead at 11.3pc.
But while the North is inflating, the South is wilting and Ireland faces crucifixion. The celtic boom is over. The Irish economy contracted by 1.4pc in the second quarter. House prices have fallen for six months in a row. A satellite of the dollar zone, it is painfully leveraged to the US property slump.
For now, Spain's inflation is the same as Germany at 2.7pc, but that is an illusory convergence. Property prices fell 4.1pc in Seville in the third quarter, 0.9pc in Madrid and 0.5pc in Barcelona on official data. The Iberian bubble is bursting, whatever sunshine vendors in Britain continue to claim.
Over 98pc of Spanish mortgages are priced off Euribor, up 60 basis points since the credit crunch. "All is beginning to go catastrophically wrong for the Spanish economy," said Bernard Connolly, global strategist for Banque AIG.

For a remortgage in Spain - to interest only perhaps - go to

Spain is left floundering with a current account deficit of $125bn (9pc of GDP). Greece is worse (10.5pc).
But this is not a national morality tale. The Spanish and the Greek peoples are victims – even if they don't yet know it. Never forget that Frankfurt kept rates at 2pc until December 2005, turning a blind eye to frothy M3 when it suited Germany. By doing so, it consigned the South to even bigger boom-busts.
Once the EMU's enthusiasts are thrown out of power in Spain and Italy this winter, Mr Sarkozy will have enough allies to force a change in ECB policy – as he is entitled to do by invoking Maastricht article 104. The bank's sacred independence is a Wagnerian myth.
As for Germany's Mr Weber: does he really mean to destroy the post-war European order nurtured by Adenauer, Schmidt and Kohl with high-minded idealism for half a century?

Wednesday, October 24, 2007

The Sting

Okay, not exactly the crime of the century, but I have had a mortgage client come to me with three properties on the same development in Spain due for completion imminently. They have been given quotes by their lawyer for arranging the three mortgages, and the bank commissions are clearly load to provide either more commission for the lawyer. or maybe to create a pot of commission to split between the lawyer and another mortgage broker.
In any event, given that the lawyer is doing quite nicely from the conveyancing, it seems a bit rich to be overcharging the client for three Spanish mortgages. It's just not cricket.
Over at we try and be upfront and honest about these things - I'll even disclose the lender's identity rather than pretend it's a big secret.
Cheers for now. Watch those fees.

Tuesday, October 23, 2007

We have just gone global

Have started this blog to get all my latest mortgage news and products out on the web to clients both old and new. I've just expanded the website to include mortgage offers in Spain, France, Italy, Portugal, Dubai, Cyprus, Florida and the Caribbean.

Over the years we have helped hundreds of clients with their mortgages in Spain, our principal market, and we've seen that the international property market has just exploded, and suddenly places like Cape Verde are on the tip of everyone's tongue. Come on, be honest, who had heard of Cape Verde a couple of years ago ???

So our model of providing great service to our Spanish mortgage customers is being applied to all these other territories - with more planned all the time. So if you're an old customer looking for that next investment, or a new potential customer, go and check out

I'm going to use this blog to keep everyone abreast of market changes and new products, that are happening far quicker than I can keep changing the main site. I may also diarise my life as a mortgage broker to a degree, if the trials and tribulations of a mortgage broker throws up anything worthy of the blog!!!

check back for more soon