Tuesday, December 9, 2008

Bringing home the bacon....or not

A round up of news from the Spanish papers, including slow sales of the traditional Christmas hams. Those great greasy looking pigs legs that are hanging in bars all over Spain. Look disgusting but taste fantastic. If the Spanish are cutting back on their stomachs then truly we are all screwed!

Banks and Savings Banks in Spain have admitted that they have stopped lending to companies and families. A Survey published on Friday by the Bank of Spain shows that the banks admit restricting the granting of credit between July and September, and that the fall will continue in the last quarter of the year.
It is also of note that families are asking for less credit, especially when it comes to mortgages.

Shops in Spain are coming up with more imaginative ideas to try and rescue Christmas sales, with discounts, interest free credits and gift cards are being seen by shops both large and small.
One area of Spanish tradition which has been hard hit by the slow down is the sale of top of the range Pata Negra ham. Sales are down by as much as 20% in the current Christmas campaign. Normally 60% of ham sales take place in the run up to Christmas.

The European stock markets have rallied today in response to the more detailed plans announced over the weekend by Barack Obama on the television programme, Meet The Press.
By midday the IBEX 35 had rallied in Spain by more than 5%, as the promise of more investment in infrastructure in the United States is expected to create two million work places. The rally in Spain, which weakened later, was led by Endesa, Ferrovial and Abengoa.

The Nissan car company and the unions in Spain have reached an agreement under which the 3,500 redundancies at the factories in Barcelona will only be temporary. Under the deal the workers affected will be without work for a maximum of 75 days, with 90% pay.
A new negotiating panel is to be set up which will plan the future of the companies under the deal.

The Ministry for Industry, Commerce and Trade has awarded the tender for the use of the 11818 directory enquiries number to Telefónica for three more years.
They are allowed to continue to run the service, but they have to reduce tariffs by 33%. The Ministry say they will carry out consumer surveys on the services next year ahead of possible changes.

El País notes today that the Martinsa real estate company overvalued the worth of its land by upto 19,000%. The paper claims that the company ended 2007 with profits because of these accounting irregularities, and gives as an example some land in Las Palmas worth a million € in their accounts, but valued at 179 million. A plot in A Coruña sold for 1.5 million appeared in the accounts with a value of 84 million.

An increase in electricity prices of 3.5% in January is being prepared by the Ministry of Industry. It comes as talks are underway on the matter in the power industry which has requested larger increases in price.

Friday, December 5, 2008

The ECB - just can't win............

From the Times website. Everyone was expecting an interest rate cut, and the ECB cut the rates by more than was anticipated. But because other economies around the world made even steeper cuts, there is now criticism that the ECB weren't brave enough. With UK rates at 2% and US rates even lower, you start to wonder what will happen if they get down to zero and we are still in the shit ? What happens when you haven't got any more % to cut ?

Interest rates tumbled across Europe and the world yesterday as leading central banks moved to try to limit the ravages of a looming global recession.
The European Central Bank led the way with a record three-quarter point cut in eurozone interest rates as it joined the Bank of England and other central banks in attempting to rekindle growth in stalled economies around the globe.
The ECB's decision to make a bigger than expected reduction in rates to 2.5 per cent, the lowest since mid-2006, while opening the door for more cuts next year, saw it bow to criticism that it has been too cautious in combating the recession gripping the 15-nation eurozone.
But while the ECB's bolder than expected verdict won applause from economists and eurozone businesses, still more aggressive action by the Bank of England and other central banks left European stock markets underwhelmed by Frankfurt's move. Both Germany's Dax index and France's CAC 40 ended yesterday's trading a fraction lower.

As the Bank of England cut British rates by a further 1 per cent to a 2 per cent low not seen since 1951, other economies were not far behind. In Sweden, rates fell by a startling 1.75 percentage points, the biggest reduction since 1992, to 2 per cent.
Elsewhere, New Zealand's central bank announced a record cut of 1.5 points, bringing its rate down to a five-year low of 5 per cent, while acknowledging that further cuts would probably be necessary. Indonesia made a surprise quarter-point cut to its rate.
Despite mounting signs that the eurozone economy is sliding still deeper into recession after shrinking by 0.2per cent in the past quarter, Jean-Claude Trichet, the ECB's President, refused to commit it to further, early reductions in eurozone rates. “I exclude nothing, but I am not precommitting on anything,” he said. “We will look at what is necessary at any time.” Asked whether the ECB might cut rates by a half-point in January, he added: “ For January, I say nothing.”
Economists said, however, that the ECB had paved the way for further cuts in eurozone rates by downgrading its growth and inflation forecasts.
The central bank now sees the eurozone economy shrinking next year by up to 1 per cent - radically down from its September projection for growth in 2009 of between 0.6 and 1.8per cent. In 2010, the ECB now sees a muted recovery, predicting eurozone growth of between 0.5 and 1.5 per cent.
Capital Economics, the consultants, predicted that eurozone rates were now likely to drop to at least 1.5 per cent in the first half of next year.
Pressure for the ECB and other central banks to take still more steps to limit the fallout from global recession was fuelled yesterday as the toll of job losses and dire corporate news from Europe, the US and Asia mounted.
In the US, factory orders plunged by 5.1 per cent in October, in their eighth consecutive monthly fall and the biggest drop in eight years. Official US figures today are expected to confirm that American employers cut as many as 340,000 jobs last month.
In Europe, Credit Suisse announced another 5,300 job cuts that will add to the toll of more than 100,000 jobs lost so far in the financial industry as banks reel from the credit crisis.

Thursday, December 4, 2008

ECB interest rate meeting

The ECB have their monthly meeting today and are widely expected to lop another chunk off the Eurozone base rate. Euribor (inter-bank) rates have been falling steadily since the last round of rate cuts a few weeks ago.

It may help in some territories, but in Spain, most mortgages are based on the 12 month Euribor, and the rates will only vary once a year. So a rate cut will only help the people whose mortgage rates are due for review this month. So 11/12ths of the population will still be on higher rates.

So it will take a full 12 months before the base rate cuts will benefit everyone.

For anyone thinking of taking advantage of the rate falls, a remortgage to a 3-month Euribor rate would be a good option.

Contact us at Europa Mortgages - your best value in Spain, for more details info@europamortgages.com

Wednesday, December 3, 2008

Mortgage rationing the Spanish Way (scene 3)

Me: Everything is ready, the developer and client want to sign at the Notary before Christmas

SBM: Oh, it is better for me if they signed in the New Year

Me: Why ?

SBM: Because I have met my target for new mortgages and bonus this year, and my new target starts after Christmas.

You couldn't make it up..............

Mortgage rationing the Spanish Way (scene 2)

Me: The Euribor is falling, there is less risk now, can you reduce your margin from +1.65% down to something more reasonable ?


Mortgage rationing the Spanish Way (scene 1)

The mortgage broker (me), Spanish bank manager (SBM)

Me : the valuation was fantastic, the LTV is only going to be 50%. Can my client borrow any more money

SBM : No

Mortgage rationing

From the Daily Wail comes the sort of story that they love at the moment - a speech from the Council of Mortgage Lenders about the current state of the mortgage market - "in an explosive speech" etc etc etc

'Dysfunctional' market: Michael Coogan says the government must act now or mortgage rationing will get worse next year
Mortgages are having to be 'rationed' and the situation will get even worse next year, the Council of Mortgage Lenders has warned.
In an explosive speech, director general Michael Coogan said that the 11.7million with a mortgage are being forced to cope with a 'dysfunctional' market.
In a reference to the struggle of millions of homeowners to get a loan, he said: 'We have, in effect, returned to mortgage rationing.'
He also said the Government's £37billion banking bailout was not enough to stop the crisis.
He accused the Government, the Bank of England the Financial Services Authority of making 'piecemeal, self-interested decisions'.
Mr Coogan added: 'Unless Government takes further targeted action to help market participants, we will see a worsening picture next year compared with this.'
If they want to solve the crisis, he said, there needed to be a better Government guarantee to encourage lending between banks.
The CML expects a paltry amount of net lending this year of just £40billion, a fraction of the £108billion handed out last year.
His comments came amid a growing storm over controversial but little-known clauses in many homeowners' tracker mortgages, known as 'collars'.
These stop the mortgage falling below a certain rate.

Around 10 per cent of the market have these and may not benefit if the Bank of England slashes the base rate again on Thursday.
But speaking at the CML's conference, a director of the City watchdog said lenders may not be able to enforce these collars because they could be 'unfair.'
Unless the existence of the collar was made sufficiently clear to the borrower when they took out the mortgage, the lender may not be able to enforce it.

Dreams shattered: Millions of people will now struggle to get a home loan
Jon Pain, managing director of retail markets at the Financial Services Authority, said the collar should have been mentioned in the Key Facts Illustration (KFI) given to all customers.
This contains the crucial information about the loan which they are about to take out, and is meant to spare them from trawling through all the terms and conditions.
Mr Pain said: 'If it is not [in the KFI], you run the real risk of both breaching our disclosure requirements and having an unfair contract term you can't enforce.
'I am well aware of potential systemic risk some lenders face in a very low interest rate environment.
'But the solution cannot be to introduce contract terms that don't exist or are unenforceable.'
Yesterday lender Nationwide said its collar, which means it stops tracking the base rate at 2.75 per cent, has always been in its KFI sent to all its borrowers.
Halifax, meanwhile, admitted yesterday that it removed any reference to its collar from the KFI in 2005, although it was still mentioned in its terms and conditions.
This could mean the embattled bank is not allowed to enforce its collar, a victory for homeowners but a costly disaster for the bank.
Under its rules, if the Bank's base rate goes below 3 per cent, Halifax reserves the right to change the tracker margin.
A bank spokesman said it is currently looking into the matter.

Tuesday, December 2, 2008

Global Warming comes to Spain

2nd December 2008 and this is the view from my house, close to the towns of Coin and Cartama, in Malaga. Snow on the mountains above Marbella. About as far south in Europe as you can get.
Global warming, Ha!

Euribor Interest Rates

The Euribor base rate has continued to fall. The most commonly used reference point for most mortgages in Spain, the Euribor is equivalent of the Libor in the UK, that is, the rate at which prime banks lend to each other in the wholesale money market. Spanish mortgage rates are generally fixed for a period of 12 months, if the reference point is the 12 month Euribor. Likewise for the 3 month rate. The ECB sets the base rate in the Eurozone, at which prime banks can borrow centrally from the ECB. The ECB is expected to cut rates further this week, which should, in turn, bring down the Euribor, and in turn lead to further reductions in Spanish mortgage rates.

Spanish Mortgage news from Europamortgages.com

The Spanish mortgage market is in a curious state right now. The Spanish mortgage market has always been a few years behind the more sophisticated and mature markets of the UK and US. In hindsight this has helped the Spanish banks somewhat, as they were far less exposed to the toxic assets coming out of the USA, and in terms of their domestic mortgages, the Loan to Value ratios are far lower, particularly in the non-resident, holiday home market. Generally, clients buying off-plan property have put in 20 or 30% deposits, and the most common mortgages available have been around 70%. In recent years the lenders had started to introduce more 80% loans, and also more flexible interest only terms etc. Since the credit crunch has taken hold though, the market has contracted significantly, and typical "best buy" Spanish mortgage terms and conditions are as follows;Loan to ValueAt the moment we can arrange 70% of valuation with 1 year of interest only, at a rate of Euribor +0.95%. Long term interest only at 65% of purchase price, 1% opening commission and a rate of the quarterly Euribor +1.25%.Contact us now for a personalised quote :- http://www.europamortgages.com/spanish-mortgage-enquiry.htm

Friday, November 28, 2008

Spanish mortgage press release

Check out our latest press release here :- http://www.prlog.org/10147800-spanish-mortgage-market-what-now.html

The Spanish mortgage market - what now ?

Tuesday, November 25, 2008

The Euribor inter-bank thingy

Equivalent of the LIBOR in the UK, Euribor is the inter-bank rate in the euro zone, and recently has been a great illustration of the banks' reluctance to lend to each other

But it has been falling steadily since the co-ordinated base rate cuts, and the 12 month rate is today teetering on the brink of falling through the 4% level

With banks in Spain adding a margin on top of this, we should begin to see variable mortgage rates in Spain under the 5% mark. And it has been a while since we have seen this.

Loan-to-value, however, is another issue entirely.

Check out the mortgage site at www.europamortgages.com
and our sister site with the cool name www.amortgageinspain.com

Lazy Sunday

Ok, so I have been really lazy and not posted anything on my blog for over a year now. I was googling my company name and came across my blog entries. Bit shocked to see November 14th 2007 was the last entry.

Nevermind, it's been a quiet year for the banking and finance world...................