Monday, November 16, 2009

Demand for goods the problem in UK

In a report from the British Chamber of Commerce, BCC, they have surveyed a number of small and medium sized firms. Lack of credit for the firms is a problem, as the banks keep tight control of the purse strings, however it is a lack of demand from consumers that is giving them real concern.
Is this evidence of a genuine drop in demand and change in spending habits (perhaps not a bad thing) or is it a function of the banks curbing consumer credit, so that people cannot spend on credit like before ?
Either way, the banks seem to hold the key.
From Spain, we hear that the Tinsa property valuations index is now showing the lowest decrease in property prices for a couple of years, showing prices only 13% down from their peak. Quite how this ties in with the demand versus supply of unsold property I am not clear, but prices can only fall so far, before sellers will just not sell. Nobody would sell for less than their mortgage outstanding anyway, and people with low or no mortgages will probably not be too worried about selling.
Thanks for reading.

Friday, November 13, 2009

Eurozone exits recession

Thanks to strong growth in Germany, and also France and now Italy out of recessions, has helped drag the entire eurozone into positive territory.

The problem is that the Eurozone is similar to the football league system, where you would have to say Germany and France are Premier league, whereas Spain have slipped to league 1 and might get relegated further.

The economies of the individual countries are so different that Germany could steam ahead, whereas Spain could be in recession for years.

Problems may occur if the ECB have to tinker with interest-rates to cool some economies, which could screw up any of the economies that are still struggling.

Thursday, November 12, 2009

Want a mortgage ? - Tell us how much you drink !

Calls from the FSA for more rigourous affordability checks on applicants that are applying for mortgages, including having to declare in much greater detail personal spending habits and socialising.

I would have thought that lenders, if they are asking to see some bank statements, would be able to see at a cursory glance whether people are drawing lots of cash, or spending lots in restaurants etc. I had a client not so long ago for a mortgage in Spain who had daily debit transactions on his bank statements for an online poker site. Not a crime by any means, but it's a potential risk for a lender.

The other thing in Spain and France which seems to be tighter, is that the concept of lending 5 or 6 times gross income is completely alien. Lending tends to be limited so that the combination of all credit payments for the applicant, are no more than about 35% of the monthly net income.

So, if you earn £2000 per month, then the maximum credit payments you can make are £700. If you have £400 a month already on a loan and credit cards (say) then that leaves £300 available for a mortgage payment.

There are no perfect solutions, and Spanish banks made many other errors in the past few years. But if a system like this is managed well, then it can also stop ridiculaous growth in house prices.

Small Rise in UK repossessions

The number of UK properties repossessed in the period July to September has risen by 3% to 11,700, according to figures from the Council of Mortgage Lenders (CML).

This total is up 5% from the same period a year ago.

But the CML said it was now cutting its forecast for total repossessions for a second time this year, to 48,000.

This is a combination of lender patience, Government measures, and lower interest rates.

As unemployent is still also rising, it will be very interesting to see what will happen when inflation starts to kick back in, as stoked by Quantitative Easing. Interest rates will have to rise and I fear more people will be in trouble, not less.

Thanks for reading. Visit the manin site at Europa Mortgages

Wednesday, November 11, 2009

Better unemployment figures

Unemployment in the UK is still increasing, but at a slower rate than expected, which is, er, good news.
So, a cause for celebration - more people have lost their jobs, but that's less than we thought.

Ok so I am being facetious. Even so, on the one hand this seems to be regarded as being good news for the economy, whilst on the other hand, Fitch, the credit ratings agency has said that the UK is in danger of being downgraded.

Quite how this all impacts interest rates home and abroad, and the exchange rates, remains to be seen. What does seem clear is that the period of uncertainty for mortgage holders in Spain, France and Portugal is set to continue. Thanks for reading.

Tuesday, November 10, 2009

Andalucia Subsidy for Homebuyers

An article below by Mark Stucklin of Spanish Property Insight that I have printed in it's entirety.
I had to read it 3 times just to take it all in. I think that it would be a good thing if there is demand for this housing and there are enough local residents that want to take up the offer and mortgages to purchase their first home. If the properties are well priced then it may be a decent bet over 9 years - given a return to some sensible level of property price increases - say 2-3% per annum.
Along with the other deals that seem to be offering 100% mortgages for repossessed homes, it does seem to me that the banks could be helping their existing customers more, by having more options to interest-only remortgages etc. That way many people that are on 25 year (say) repayment loans, could take a couple of years interest only, to lower their monthly outgoings and reduce risk of repossession and bad debt, at least until the market settles down a bit. Most people would rather keep hold of their properties and sell in a few years time.

Here is the article-

The government of Andalucia, or Junta, announced yesterday a subsidy of 1 billion Euros to help liquidate the region’s property glut estimated at around 70,000 newly-built homes.

Like the ‘cash-for-clunkers’ programme used to subsidise car sales, public money will now be showered on house-hunters in Andalucia. But second home buyers can stay in their seats as the scheme only applies to local residents buying main homes. Even so, it could benefit foreigners living in Andalucia, and help lift the market out of its slump, which might lift prices for all types of property.

How it works

The way it works is developers participating in the scheme have to offer their property for sale at mortgage cost, wiping out their margins and giving a discount of 20%. Participating banks, for their part, will loan 100% interest only for the first 3 years. Starting in the fourth year the Junta will offer loans to subsidise mortgage payments for up to 5 years and a maximum of 15,000 Euros. As a result, buyers will save as much as 40% over 8 years, according to calculations by the Junta.

The offer stands until the end of 2010, the properties must be newly- built, and the mortgage no greater than 245,000 Euros, the price limit for social housing. Mortgages must be 100% LTV, up to 30 years, charging an interest rate of Euribor +1%

Read the fine print, though, and the Junta isn’t being so generous. In year 9 mortgage lenders have to reimburse the subsidy to the Junta and add it onto the outstanding mortgage, so the borrower pays in the end. Nevertheless, thanks to inflation, buyers will probably have to pay back less, in real terms, than they borrow. Many people expect inflation to take off in the next few years.


You could argue that it is morally questionable for the government to be spending 1 billion Euros subsidising Spanish property buyers when there are so many other more needy causes. And isn’t this is just a wheeze to get buyers to pay inflated prices for homes today whilst transferring the burden of payment onto tax payers in the future?

Wouldn’t it be cheaper, and cause less economic distortion, just to drop prices today to a level that people can afford without crucifying themselves on a 30 year mortgage subsidised by the government?

Spanish bank repossessions "myth"

Here's a report that makes for interesting reading. I have heard from clients that many banks have seemed happy to take back property from people without legal action or repossession, and then offering them with high LTV mortgages, effectively 100%, which never crystallises the loss or bad debt, as it switches the debt to another customer. So the banks have been able to show that they haven't been affected by the credit crunch and bad debts because they have been able to show the debts differently in their books. Plus if they hold the property it can be valued as an asset in the accounts rather than selling at auction and recognising a loss. Having more provision for bad debts (unpaid Spanish mortgages) would affect the reserves that they are required to hold, hence affecting the banks profits, and their ability to borrow and lend.

A new ruling by the Bank of Spain could force Spanish banks to release more discounted property onto the market and address what some agents are calling the “myth” that it’s possible to obtain genuine price discounts from banks.The rule will require banks to provision 20 percent of the value of property for at least a year which will erode the reported profits of banks holding onto large volumes of property containing less than 20 per cent equity.

According to Richard McEnery, Spanish Regional Manager at A Propertys, it is extremely rare to be able to obtain genuine market discounts from banks offering repossessed property. “Most properties aimed at the international market have 100% or even 110% mortgages. Banks are holding onto these properties as they don’t want to make a loss. In most cases it’s a myth that banks are offering the best [repossession] deals, the genuine discounts are coming from private owners who are desperate to sell”.

More developer bankruptcies ahead

The new ruling could change the commercial relationship between banks and struggling real estate developers. Recently, Spanish banks have been keeping the lid on their non-performing loan ratios by accepting property from developers who would otherwise go bankrupt. The new requirement is likely to change the economics of this practice. In certain cases, it will become more “profitable” for banks to let developers go to the wall and write off the loans rather than playing a wait and hope the market recovers game.

Necessary medicine

It’s no secret that the Spanish property market is structurally imbalanced. There are estimated to 3 million unsold properties on the market and banks are keeping prices high by failing to release inventory onto the market. Spain is still the world’s most popular destination with overseas property buyers but until this inventory is cleared, transaction volumes will remain much lower than they need to be and developers and agents will be sat on their hands with nothing to do.

Thursday, November 5, 2009

Decision Day for central banks

Interest rate decision day in the UK and eurozone. Both are expected to keep interest rates on hold, which on the face of it is good news for mortgage holders in the UK, Spain, Portugal, France etc etc.
The main questions surround the levels of quantitative easing and whether or not there is going to be any more money pumped into the economies.
It seems to be the general feeling that interest rates will remain at the record low levels until the end of 2010.
The weakness of the pound I think is going to cause more concern. If you live in Germany and buy oranges from Spain, the transaction between the companies involved is in euros, and you hand over euros in the shop. Inter-country trading, within the eurozone, has to be far more stable than importing products with a weak sterling.
It's a real conundrum as the way of making the pound more attractive is to have higher interest rates, which makes the pound more attractive as the income on investments is higher. So it would be better to hold sterling than euros. Of course, does higher interest rates further screw up any UK recovery and drive further loan defaults, unemployment, and businesses going bust. Many householders and business owners claim not to have felt any benefit from low rates, because finance isn't available. Tricky.........

For mortgages, remortgages and advice on property and mortgages in Spain, France, Portugal, Cyprus, Turkey, Dubai and Florida, go to

Wednesday, November 4, 2009

Self-Cert lenders almost gone

That strangest of mortgage products - the self-cert or non-status appears to be a dying breed - at least for now.
Designed to supposedly allow finacing to business owners and self-employed people that had less straightforward finances and couldn't necessarily prove their income.
A good idea in theory, of course in the boom time it was abused no end by people wanting to borrow more than they can afford.
People lie to get what they want - as simple as that. I have spoken to many mortgage clients over the years about mortgages in Spain, Portugal and elsewhere, and very often when the paperwork arrives they earn less and have higher commitments than they told me.
Surely there has to be a huge question mark over anyone that claims they can't prove their income ? If you are a builder or tradesman and are paid largely in cash, then you need to do some accounts, declare to the Taxman, and then you can qualify for a proper mortgage. Lenders should run a mile from anyone that doesn't put their income through a bank account. You can't have your cake and eat it
Bloody inconvenient for anyone wanting to get a self-cert mortgage, but it can only be an indication that these are high risk loans and lots of them must have gone down the pan in the last few years.
I imagine the lenders may introduce them again but it would have to be low ltv and with a premium on the rate to compensate for the added risk.
I can remember Spanish banks that would lend on the basis of a passport and letter from a "Chartered Accountant" - what a joke. Spanish banks actually tightened up on this type of thing much quicker than in the UK, as soon as they discovered Experian reports really.
What the banks in Spain don't seem to realise, is that all the bad lending that they did - overvaluations and simply asking for payslips, has been negated by their tighter lending criteria of looking at bank statements etc. Of course, all of this can be forged I suppose, but 70% lending to decent clients is surely not too much to ask, is it ?

Currency Market Report

Below is this weeks currency market report provided by our friends at www.foremostcurrency
Sterling remains weak relative to the euro, which, in spite of low interest rates, is still a pain for those euro mortgage holders that are sending sterling each month to make their payments. The biggest force affecting the exchange rates at the moment seems to be how the UK and Eurozone are dealing with the recession.

Euro (EUR)
The Euro stabilised towards the end of last week after early losses against Sterling. Consumer prices in the Euro zone fell 0.1% during the year and combined with a slowdown in money supply growth, to 1.8% in September from 2.6%, made October the fifth consecutive month that the annual rate has remained negative. In turn this raised fears that the European Central Bank (ECB) may need to keep interest rates low in order to maintain support for the economy. Finally, the week ended with the announcement of a 9.7% unemployment rate, the highest since the Euro's introduction.
The GBP/EUR rate closed up 2.66% last week at 1.1159, from 1.0870 a week earlier, benefiting those converting Sterling into Euros. Those looking to do so in the future should discuss the possibility of a forward contract in order to take advantage of today’s rates up to two years into the future.
This week sees the release of the latest interest rate decision by the European Central Bank on Thursday. With a no-change decision widely expected the Euro is likely to gain strength and with it weaken GBP/EUR exchange rates. Finally, coupled with the prospect of further Quantative Easing by The Bank of England on Thursday those looking to purchase Euros should perhaps be considering the possibility of doing so before rates fall further.
British Pound (GBP)

The volatile nature of markets was illustrated by Sterling’s contrasting performance from the beginning to end of the week. Friday’s shock negative GDP sent the Pound into a nosedive against the Dollar falling as low as 1.6251. Towards the end of the week however, we saw the Pound keep pace with the greenback as risk appetite returned and showing rises above $1.66, its strongest in nearly a week and almost 4 points up from Monday's low of $1.6251.
The most important sentiments we hope to hear from the BoE are that of decisive and precise action; a categorical statement that either QE is finished or an exact final amount that will be allocated would bode well for the Pound in the future. With inflation figures in the UK still very low, GDP still negative, a country in recession and the banking sector still on its knees and now facing stiff reform measures implemented by the Government, it seems odds on, around 70/30, for more stimulus, many expect the BoE to increase QE by £25bn to £200bn on Thursday 5th November, although this would undermine the Pound an unexpected rise (rumors of a £50bn increase) would certainly mean a considerable Sterling downside as it we have seen before.
US Dollar (USD)
The US Dollar lost ground against Sterling last week, but finished higher relative to most other major currencies. As investor confidence in global economic recovery prospects waned, the US Dollar generally found support amid the weakness in global stock markets a characteristic relevant to its safe haven status. The GBP/USD rate closed up 0.85% at 1.6445, from 1.6306 a week earlier.
Brighter news came as the US economy exited recession, with US GDP expanding at a year on year rate of 3.5%. This was the first positive reading since the second quarter of 2008, but the US Dollar weakened slightly following an associated lift in investor risk appetite benefiting some major currencies such as Sterling.
Several key releases this week could induce greater volatility in foreign exchange markets. The US Federal Reserve's interest rate policy meeting is scheduled for Wednesday. Whilst no major policy changes are anticipated, changes in its assessment of economic conditions might impact on US Dollar exchange rates. Finally Friday’s Non-Farm Payroll report which has played an important role in the past with exchange rate movement will clarify conditions in the US Employment Market.

Christmas could come early if you need to repatriate your funds from the Dollar as the majority of the financial industry is expecting further QE which may result in Sterling weakness however, if risk appetite plays another role in the markets the initial weakness may well be short lived. If, however you wish to buy the Dollar, to avoid disappointment, it could be wise to do so before the BoE’s announcement on Thursday 5th November.

This Weeks Data

We have interest rate decisions for the USA, Australia, the UK and the EU.

The Euro’s prospects are likely to be driven by any comments about its strength from European Central Bank President Jean-Claude Trichet following the interest-rate meeting. The BoE is expected to increase its current stance on asset purchases, and inject further funds into the economy, and also keep interest rates at a record low.

The European Central Bank expected to keep rates on hold but may make further talk on exiting its loose monetary policy. This could cause further Sterling weakness, so contact your account executive early to discuss the possibilities of locking in current rates before the market prices in these future movements.

Wednesday also sees various measures of the economy and inflation for the UK, while Friday sees US non Farm Payrolls. The report presents the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be excessively volatile, and so often affects the value of USD.

Ger - Purchasing Managers Index
EU - Purchasing Managers Index
UK - Purchasing Managers Index
US - Home Sales

TuesdayAus - Interest Rate Decision
UK - PMI Construction
US - Factory Orders
US - Consumer Confidence

UK - Nationwide Consumer Confidence
Aus - Retail Sales
Ger - Purchasing Managers Index
EU - Purchasing Managers Index
UK - Purchasing Managers Index
UK - BRC Shop Price Index
US - Fed Interest Rate Decision
US - Unemployment
NZ - Unemployment

Aus - Trade Balance
Swi - Consumer Price Index
UK - Industrial and Manufacturing Production
EU - Retail Sales
EU - Interest Rate Decision
UK - Interest Rate Decision

US - Non Farm Payrolls

Tuesday, November 3, 2009

Spanish Mortgages - Toxic Assets

I have heard that as part of the proposed break up of the bailed out banks, the Spanish mortgage parts of the business are likely to form the toxic assets and be hived off, possibly into a so-called "bad bank".
What does this mean for the operations in Spain and their current mortgage book ? Are they due to be closed, or given a clean slate to build their mortgage books again ?
Certainly Lloyds and Halifax have a branch network and probably quite a lot of normal retail customers with current accounts etc, so I think there must be a need to keep these branches.
Hardly good for morales or market sentiment if the UK banks say that all their Spanish mortgages are useless and may turn into bad debts........

Dodgy bankers creaming off customers in Spain

News that RBS is investigating two UK based members of staff that were involved in their Spanish mortgage business comes as a suprise. It's a suprise because its amazing that this type of story hasn't been prevalent over the past few years.
Think about it, in the boom years estate agents were earning normally at least 5% and up to 10% of the price of a property in commission.
If you have a client referred to you by his bank manager, and they buy a property that earns you €12,000 in commission, then it's easy to see how kicking back a few grand to the bank manager helps keep the flow of clients coming.
That's what many people were doing, after all, lawyers, Spanish bank managers, uk based agents, and basically any old Tom, Dick or Harry, would refer anyone looking for a property to an agent, in the hope of a sale and a kickback of some commission.
This was almost certainly driving the increase in property prices, along of course with ever greedier developers.
If they were going to pay 8% commission say, then that would simply be built into the price. Agents had no interest in any property that didn't have 5% commission in it, so all resale properties would have the commission added to the price the vendor wanted. All the time the vendors heard that prices were going up so that just fuelled the increases. In a rising market this worked for several years. Not any more I think. Coupled with the normal taxes and costs of 10%, it would be often at least 15% that the client was paying on top of the real price of the property - ie the price that the vendor would receive.
I don't know how we get out of this in Spain......

1 bank, 3 different offerings

In Spain now, we have the possibility of mortgages with LloydsTSB, Halifax, and Lloyds International, all part of the same bank. But, when it comes to mortgages in Spain, they are all competing against each other with different offerings, none of which is perfect by any means.
Halifax will subrogate (take over your Spanish mortgage and pay the costs) whereas the LLoyds pair won't.
Halifax are still offering interest only, the others aren't.
Add to this the differences in rates, charges, maximum terms and ages, and what you have is a confusing mess.
If they would only put their heads together and produce a portfolio of Spanish mortgage products that was uniform and market leading then they could literally clean up.
A decent higher LTV interest only option for second-home owners would be really profitable business for them, and help people with holiday places that may be struggling against the increasing stupidity of the Spanish banks.

Wednesday, October 21, 2009

Various stories seem to be about regarding the start of a recovery, or at least the bottom of the property price crash in Spain.
I have reprinted a report from Reuters below which seems to be eminently sensible.

In my mind, the simple supply and demand basis has to be key to the situation

There is clearly a supply in excess of any demand, certainly at the moment. Up to a million empty homes ?

Demand domestically can only increase in the long run if the Spanish birthrate and hence population increases significantly.
Or if many young Spanish, who live with their families, are suddenly able to afford their own places - which is unlikely.

Demand from overseas buyers, which is generally in the coastal areas, is currently being affected by several factors :-

Problems in the potential buyers' "home" countries - such as the UK.
Availability of finance at home - ie UK buyers had often released equity to buy in Spain
Availability of finance in Spain - currently about 60% is a good deal
Uncertainty surrounding the market and further price falls
Exchange rates - weakness in the pound is a real barrier to UK buyers

MADRID, Sept 30 (Reuters) - Spanish house prices fell at a record rate on the year in the second quarter and economists said prices are unlikely to have hit bottom due to massive stocks and expectations of a prolonged recession.
House prices plunged 7.7 percent year on year in the second quarter, official data showed on Wednesday, marking a year of sliding prices and compared to a previous record 7.6 percent drop between January and March.
Second quarter house prices fell 0.4 percent on a quarter-on-quarter basis compared with a 2.7 percent fall in the first quarter, the National Statistics Institute said.
The price of new homes fell 3.9 percent year-on-year, the second consecutive quarter of falls, while existing house prices fell 11.2 percent, easing from a previous drop of 12.5 in the first quarter, the INE reported.
Expectations of a deep, drawn out recession, an unemployment rate more than double the European average and new-home stock piles which rival much larger economies mean the property market will remain in a slump for some time, analysts said.
'Just through the laws of supply and demand, I can't believe the drop in house values has reached a bottom yet,' said economist at Renta4 Natalia Aguirre.
The government estimates there is a stock of around a million new unsold homes in Spain, similar to that reported in the United States which has a population more than six times the size.
Real estate values have been hit by sliding mortgage lending, which dropped 33.9 percent in July, and house sales, 20.3 percent lower in the same month year on year.
Before the property market crash, the Bank of Spain had warned that the boom in the housing sector, fuelled by cheap credit, had left property 20-30 percent overvalued.
Spain's economy is expected to contract 3.6 percent this year and the government doesn't expect quarter-on-quarter growth before the second quarter next year.
Meanwhile, banks are tightening lending conditions, stung by rising bad loans and deteriorating asset quality.
'The state of the economy and worsening financing conditions mean further, and deeper, price falls can be expected in the next few quarters,' said consultant at international financial analysts AFI Maria Romero.
The failure by the banks to pass on record low reference rates to borrowers will also help dampen the recovery in the housing market, Romero said.
The Bank of Spain said on Wednesday the average interest rate offered by banks to acquire homes in July stood at 3.07 percent. The reference Euribor rate in comparison was 1.4 percent in the same month.

Monday, October 12, 2009

Some signs of recovery ?

Had one of our banks on the phone the other day asking for some mortgage business !

After months of them turning most things down, and the favourite word being "no" - is this a sign of things turning around ?

A willingness to lend is one thing - actually having mortgage products that anyone wants or needs is another.

I hope it was worth it.................

To the lowlife scum that broke into my house in Malaga and nicked all the leather furniture - I hope you all die nasty, slow, horrible deaths.

Seriously, how much do they think they will get for a leather suite and a fridge freezer ?

The furniture was all 2+ years old and not in new condition by any means

What will they get - 200 euros - 300 ?

What's more annoying is the damage to the window that they made to get in, and the hassle to me of getting it all fixed and replacing the furniture.

Bastards. End of rant

Monday, July 27, 2009

Lanzarote Property Market Becalmed

This week we are bringing you a guest posting from Nick at Lanzarote Guidebook. You can check-out their site at

The Spanish owned holiday island of Lanzarote has long been a hot favourite with overseas investors. Thanks to a stable tourist industry and a clement year round climate. Which has, until recently, ensured a full 12 month rental calendar and a steady stream of income for thousands of holiday property owners.

But just like elsewhere in Spain the property and tourism sectors appear to be slowly grinding to a halt. As visitor numbers fall away and mortgage finance vanishes.

The latest arrival figures from AENA, the Spanish airport operators, certainly make grim reading for the many thousands of owners of apartments and villas in Lanzarote. As visitor numbers slumped once again last month, by over 24%. Whilst the island has now welcomed 18% fewer tourists during the first six months of this year than in the same period in 2008.

Traditionally the UK has been the engine room of both the island’s property and tourist markets for well over 20 years. Last year for example British tourists accounted for over 50% of the 1.5 million foreign holidaymakers who visited Lanzarote. Whilst British buyers have been, by some distance, the largest group of overseas property investors by nationality.

However arrivals from the UK have slumped alarmingly this year. Falling by nearly 27% last month and by just over 20% for the year to date. As 85,508 fewer British tourists touched down on the island during the first six months of 2009. Thanks to the depreciation of sterling against the euro combining with the impact of the credit crunch to erode consumer spending on European holidays.

The weak pound has also contributed to a decline in property transactions and enquires from UK buyers. As any gain made from falling property prices on the island has been more than offset and undermined by the exchange rate.

Local estate agents all report a growing number of reduced price properties on their books. But with few buyers around to take advantage. With many pointing the finger at local banks – which have tightened lending criteria to such a degree that it has become extremely difficult for overseas investors to secure finance.

As a result, the Lanzarote property market is now largely becalmed. Whilst the island’s tourist industry struggles to adjust to a sharp reduction in arrivals and occupancy levels.

Thursday, July 9, 2009

25% of UK loans unsuccessful

News from the UK yesterday that 25% of mortgage applications are currently turned down for one reason or another.
That seems like quite a lot, until you compare it with our experience in Spain in the past few months, where I suspect that only 1 in 10 mortgage applications have been successful.

We have had to deal with :-
Spanish banks not wanting to lend to non-residents
Spanish banks not dealing with brokers
UK based banks withdrawing products and moving the goalposts
LTV's being slashed to 60% if we're lucky
Valuations being either a pleasant surprise or a complete disaster - the touble is there's no bloody consistency
Poor quality journalism and publicity about the Spanish property market, focussing on "tabloid" type disasters
Exchange rates to make you weep
Rentals being hit because less Brits are going on holiday
Plus all of the woes in the UK have been affecting those owning or wanting to buy holiday homes in Spain - UK unemployment, recession doom and gloom, lack of lending in the UK so less equity can be released, housing market uncertainty etc etc

Considering that in about 2005 almost anyone that could produce a bit of paper with some numbers on it could get a mortgage in Spain, the turnaround is remarkable

Thanks for reading

Tuesday, July 7, 2009

Lending reluctance

A brief extract from the Wall Street Journal

"Policymakers at the European Central Bank are expressing concerns that some nations' rescue efforts for the banking sector are not helping to revive lending. ECB and other eurozone officials are worried that lending reluctance could hinder the region's economic recovery or even worsen the downturn. ECB President Jean-Claude Trichet said banks need to be "up to their responsibilities, namely to ship to the real economy the extraordinary efforts that we are making."

At the moment we have a great disparity between the eurozone countries, in terms of what we can get for our non-resident clients

Spanish mortgages are now 70% if you are lucky, 60% if you want interest only
In France, 85% is still available
In Italy, it was difficult and now impossible
In Portugal, 70% with interest only is still available

Not in the eurozone but things are very difficult in Cyprus and damn near impossible in Dubai, where the main problem seems to be that the mortgage market never really got off the ground before the crash, after years of inflated flipping, and the perceived wisdom is that values are falling further.

If the differences are the same for their own residents, then things are likely to improve at different speeds depending on where you are. We know that getting a Spanish mortgage is very difficult at the moment even if you are a Spanish national. Considering that Spain is considered to be suffering more than most, it seems that the recovery may be slower.

What we need is for the first Spanish bank to put their head up out of the tranches and say "yes please we would like some non-resident clients and we can do this....."

Preferably Spanish mortgages for 70% of valuation (not unreasonable) with a choice of interest-only periods, and long terms available.

What the Spanish banks have always failed to realise is that if people have a house in the UK, the they don't need a repayment mortgage in Spain because they can just pay the interest for ever! This is clearly the most profitable business for the banks to be in, as the capital is not repaid, and defaults will be low as the payments will be the lowest possible

If I had a few billion and a banking licence I could clear up in Spain - decent clients and properties, at reasonable LTV's and on interest-only. A margin of 0.5% and I would make a fortune

All it needs is a bank to say yes, then the others would have to follow

No idea when this is going to happen though

Monday, July 6, 2009

Spain to legalise 40,000 homes

Well, what else were they gonna do?

The Spanish property and mortgage market has been hit hard enough recently without having to worry about your apartment being knocked down

In fact, many people that had bought illegal properties had bought from developers that had honestly expected their licenses would be approved, or that had greased the way by way of back handers to dodgy Mayors and town hall officials

This was how things happened, and had been going on for years - build the develepment and sort the licence out later

Some people have mortgages at place like Reserva de Marbella, where the properties are illegal and they haven't been able to remortgage because no other bank will take on the risk

If they do sort this out and legalise a lot of properties, then it may help galvanise the mortgage market, as some clients will be able to remortgage or release equity - at least if there are any bloody banks still lending

If nothing else, once it is sorted then it will help give the impression that Spain has sorted out the problems, and it may be seen as a safe place to buy in again

Whether they will sort out the campo (country properties inland) remains to be seen.......

Spanish Property Valuations

Figures are out from the Spanish office of statistics that Spanish property prices have, on average, fallen 7.6% in the past year, and new-build propertuies have only fallen 2% !

Why do they do this ? What is the point ?

Anyone working in the Spanish market, or indeed any owners or prospective purchasers, know full well that prices/valuations are down somewhere between 20 and 30%, if not more

Empty new-builds - well they can't give them away - discounts of 40-50% seem commonplace

The article I read mentioned the "black money" (cash) part of the purchase, that still goes on and is unobserved by the Notary, which can distort the figures

This means that the declared prices that are recorded are actually lower than the actual selling price. But this has always happened so it is all relative

Although perhaps the cash element is sneaking back into the equation as people try to save taxes, and who can blame them in the present climate, to be fair.


Tuesday, June 23, 2009

Spanish Tax reforms - my solution

News in the Spanish media about proposed tax reforms designed to draw more funds into the treasury to help the Spanish government´s spending requirements. Although the way it seems to be going it looks like they are going to need an increasing amount of dough to support the growing levels of unemployment. One in five of the workforce, or thereabouts, since you ask.

Nobody seems to have mentioned real estate taxes in the proposals though, which is amazing, seeing as Spain´s problems are inextricably linked to their real estate bubble.

All talk is of raising more money from taxes

Funnily enough, there must be almost no money coming in from property taxes at the moment, as nothing is selling.

So, why have them at all ?

It was a market that has over 10% cost of entry (on top of the purchase price) 7% IVA/transfer tax and 1% stamp duty.

And the taxes on mortgages and remortgages are also prohibitively expensive.

That is before we mention the ridiculous notary system

And for selling and buying another property you had to pay the costs again on your new place

This was a rubbish expensive system that worked for a number of years in a rising market

Well I am sorry to say that the market has gone - probably for good

So, get rid of the taxes, as there is no money coming in now anyway

What will this do and how will it help ?

Well, it will mean that a 70% mortgage will mean you need about 33% of deposit instead of 43%

And if clients can freely remortgage to better deal, they can save money, spend more in the economy, and create a bit more competition with the Spanish banks

The Spanish banks will have less clients defaulting, and some more of the empty stock that they are holding may begin to be sold as all of a sudden it is another 10% cheaper, without any fall in the market price

People that may have been interested in buying, can now maybe afford a property more easily, as they had to pay that 10% costs anyway

So the market might move again, property would sell, people could remortgage, more money swilling around the economy and able to be spent on goods and services that do atteact collectable taxes

And less people would be unemployed so the governement would save some money on handing out benefits to out-of-work construction workers etc, because many of them would have some work finishing off projects and working on people´s properties that have been able to move etc or remortgage to renovate or extend

Do I think that the Spanish Government, having made a fortune from real estate taxes will do this ?

No. Of course they won´t.

Almost the final nail

A product update today from the Leeds Building Society, one of the lenders that has remained the most reliable in Spain throughout the credit crunch

Now it seems they have finally capitulated, and to a degree that is more pronounced than their rivals in Spain

The key changes are that:-

They will no longer offer interest-only mortgages in Spain

Maximum LTV´s for apartments will now be 50% (down from 65%)

Maximum age at the end of the term will now be 65, unless the clients can demonstrate affordability beyond this age

Income multiples have dropped, making it more difficult to qualify for the loans

This is grave news for clients with mortgages in Spain that were hoping to change to an interest-only loan.

Our clients in the past 9 months or so have almost exclusively been for remortgages, as people seek to lower their outgoings by paying interest-only on their holiday homes

Leeds were offering the highest % LTV in Spain for switching to interest only, and combined with falling valuations that will have scuppered lots of clients plans

The Leeds is a business of course and they have to look at the risks and protect their own interests. But how do we get out of the recession and get markets moving again when more people are stuck with higher rate repayment loans

How indeed are they hoping to sell any property in Spain when 50-60% seems to again have become the normal lending levels

It´s another move in the wrong direction just when we were hoping and needing some signs that things were settling down, and indeed some reports have started to filter into the media about the famous "green-shoots" of recovery

Thanks for reading

Thursday, June 18, 2009

Spanish banks downgraded

At last the Spanish banks have all been hit by Moody's, and all had their rating's downgraded - well, 30 of them have.

All I can say is, I'm surprised it has taken this long

I have been saying for years that the flabby system of too many branches, staffed and with hardly any customers, living off the fat of the property boom, has been a growing problem.

Take La Cala de Mijas in Malaga. It's a pretty small place, yet it is stuffed with bank branches. At one point they had 2 Solbanks and an Atlantico - in the same group.

All the managers I dealt with just didn't see that there are too many banks and too many branches

Now there is going to have to be some serious bloodshed as mergers and takeovers will happen, and hundreds of branches will have to close

There needs to be serious reform in terms of the way the banks operate, the red tape, the stupid taxes, the ridiculous mortgage expenses etc etc etc

Spain has always seemed to be some years behind the US and UK. Now it is danger of regressing further

Thanks for reading

Spanish bank discrimination

So here's the deal :-

Spanish banks, having overlent in the past, have ended up with a shed load of property on their books

Partly it has to be said, due to the completely stupid way that mortgages work in Spain, so there is very little flexibilty when it comes to refinancing or trying to modify loan conditions

And they also have a huge stock of property from busted developers, that the banks had been happy to lend millions to in the past

So, they won't play ball if you want to change your loan or remortgage

Valuations are falling faster than Ronaldo when the wind blows

And we are lucky to get 60% loans against these dropping valuations

So, what are they doing with all their stock ?

Simple, offering the units with up to 100% finance at favourable terms

So they can shift their stock, whilst the rest of the market continues to flounder

How can anyone else be expected to buy a property from a private vendor, or a developer, when you can buy a cheaper unit, with better financing, direct from the bank ?


Thanks for reading - send us an enquiry and we'll try and get you a worse deal than the banks will if you buy from them..........................

Friday, June 12, 2009

You have got to be kidding me

Spanish banks don't like property that is in any sort of rental program

Because they think they will have trouble repossessing it if there is a 12-month contract for rentals etc

Even though the repossession process in Spain is glacier like in speed terms

So we have a client that has a €220k property that will go into a 20 year 5% rental program

The bank are valuing it at €110k

Yes, half the price

And they will give him a mortgage of 70%

€77,000 mortgage on a property that cost about €235k after taxes

Thats about a 33% mortgage

Some risk - the income is going to be way more than this

Stupid, stupid stupid, and very expensive for our client. Like it's his fault the banks are all screwed...............

Is mortgage broking broken?

Clever play on words, yeah?
Actually, things are looking pretty bad in the Spanish mortgage market at the moment, certainly from the point of view of a mortgage broker.
Why ?
Well, there seems to be continued downward pressure on valuations carried out by the Spanish banks for mortgage purposes.
That is to be expected at the moment I suppose, given that there are so many empty properties in Spain, and the market has virtually disappeared.
But when it is combined with reductions in LTV offered by the lenders, it starts to make it virtually impossible for most clients to remortgage.
The best LTV's we are getting at the moment are 60-65%.
When these two factors are combined, you can have a property at 80% of it's original purchase price, and a bank offering 60% of this.
So, you can get a property with €100.000 purchase price, and the best remortgage is €48.000

Not many people bought property with 48% mortgages in recent years

So unless we get a miracle in terms of valuations or a pickup in the property market ( which seems unlikely) I don't know what we are going to do.
The banks will need to start lending 85% of the lower valuations for it to work
But why would they lend if prices are falling further
It's a bit catch-22 and could remain in a downward spiral for a while.........

Thanks for reading

Sunday, May 10, 2009

Body parts to the highest bidder

Bizarre story I came across in the Times Online, about Spanish people, struggling in the recession, offering their kidneys for sale to make ends meet.

Completely illegal of course, but the seller, and buyer (usually from another European country) meet and do the deal, and er, extraction, in 3rd independent country where they can get a doctor to do the deed.

It is of course a sorry state of affairs, and it is the extreme stories that catch the eye

But despite stories of Government help and negotiating with the banks in Spain, my experience for people that are struggling with their mortgage payments, is that the banks are in a state of panic and are coming down on the heavy side of unreasonable

Thanks for reading

Friday, May 8, 2009

Why choose interest only for your Spanish mortgage

I wrote an article today to post on some article directories. Was rather pleased with myself so thought I would blog it here as well;

If you have a property in Spain with a Spanish repayment mortgage, ask yourself if you have recently been worried about any of the following :-

The credit crunch
Interest rates and mortgage rates
Currency Exchange rates
Property price crash
Banks going bust

If none of the above has concerned you recently, congratulations - you can continue moving through life with your head in the clouds and are probably beyond saving. Just kidding - if you are unconcerned about these things, good luck to you.
In reality, almost everyone has been touched by the financial meltdown, but we aren't completely helpless. If you have a repayment mortgage in Spain, you can take reasonable steps to protect yourself from the economic uncertainty.

The credit crunch
This phrase has become so ingrained in our lives in the last few months, that it seems to now cover a whole range of problems and disasters that have been occurring. In basic terms, the credit crunch is affecting your Spanish bank in some regard, and is probably worse than they have admitted. This is affecting their ability and willingness to lend money on decent terms. Go ask them if you can modify your mortgage and the manager will stop crying into his con-leche and laugh you out of the (empty) branch.

Switching to an interest-only mortgage will ensure that your monthly commitment is as low as possible. Whatever financial disasters occur, you only have to pay the interest amount each month. Keep the savings aside for a rainy day.

Interest rates and mortgage rates
Base interest rates in the eurozone are on the floor. Down to 1% in May 2009. Great news for my Spanish mortgage you say. Not so fast. It isn't quite that simple.
Your mortgage is probably based on the annual Euribor, which is 1.7%, because the banks are still uncertain about lending to one another over a 12 month period. Then you have the bank margin of at least 1%, so you are paying 2.7% as a best case. But very few people are. If your annual rate changed in November 2008, then you are likely to be paying about 6% until November 2009. If you are on the IRPH rate, an average of bank rates, then you will be paying a rate that is much higher than the Euribor and is falling much more slowly.

Switching to an interest-only mortgage could get you on the much lower monthly or quarterly Euribor rates. Take advantage of the low Euribor now, until the inevitable increase in rates as the financial systems settle down and inflation starts to reappear in the economy.

Currency Exchange rates
You bought the property when 1 of your British pounds bought nearly 1.5 of those new fangled Euro thingies. The mortgage rate was low and the payments were easy when the pound was strong. Now it's almost one-for-one and each pound only buys a bit more than one euro. That hurts.

Get onto interest-only. It's the only way to minimise the amount of pounds you are converting to euros. Save some sterling elsewhere and pay off a lump in the future when the pound is stronger. But don't keep sending pounds to pay back your capital amount when the euros are so damned expensive to buy.

Property price crash
It's a disaster, Spain is full of empty properties and they are all worth less than a used Ford Cortina (remember those - a Ford curtain. Very odd)
Actually, it isn't going to be so bad, as these things always go in cycles. But it might be a bit sticky for a few years. You didn't buy the property in Spain to make a fast buck though, did you? So lets assume you are going to hold it for 5-10 years.

Why switch to interest only though? Well, if you have negative equity at the moment, then you are paying back capital owed that is more than your asset. That just seems wrong. Ok you are effectively paying back money and saving, but there are so many reasons against that at the moment. Pay only the interest. You have a property to use or rent out. No redemption penalties mean you can repay a chunk when you are feeling flush and it feels right again.

Banks going bust.
Some other bank is always going to pick up the loan book, so you can't get away with it if your bank goes bust. Imagine that, wouldn't it be cool if your mortgage liability dies with the bank. Sadly it's not going to happen. What might happen though is that there is a big disruption in the Spanish system, that hasn't happened yet. There is going to be blood, and there will be a level of consolidation never before seen in Spain. What won't accompany this turmoil is decent products and service. Already the banks are so unhelpful to existing clients. Remember how they fell over themselves to lend to you in 2004. Those days are gone my friend.

How about some UK banks that have already been through the pain of the credit crunch and forced mergers, and are starting to come out the other side. You can have more innovative products, and customer service that you can shout at in English. Pay interest-only and you can sit pretty watching the Spanish banks collapsing.

Not nice when it happens, and you probably won't see it coming. If you are made unemployed, and it is on the rise, then how do you pay your repayment mortgage ?
Unemployment affecting others can also impact you. The uneployment rate in Spain is heading rapidly for 20%. This will hurt the whole economy in Spain, and the strain will be felt by the Spanish banks, who will have to get more money in from their remaining solvent clients.

If you are only paying the interest on your mortgage, then you are more likely to get through an unemployed period yourself, and your exposure to the problems of general unemployment will be minimal.

So, lots of problems that can affect your Spanish mortgage, and one simple solution available that allows you to take as much control as possible in the current situation.

Wednesday, May 6, 2009

House prices still falling in UK

UK house prices are continuing to fall sharply, according to the latest survey from the Halifax.
The lender, now part of the mega enlarged and taxpayer owned Lloyds Banking Group, says prices fell by another 1.7% in April, pushing the annual decline from 17.5% to 17.7%.

This means that the average UK property is now worth £154k, £33k less than a year ago.

This is clearly going to be a major worry for anybody with a mortgage of 80% or more

The Halifax warned that house prices would probably continue falling in the coming months. "Rising unemployment, low consumer confidence and the reduced availability of credit are all expected to exert downward pressure on the housing market over the next few months," said Martin Ellis, the Halifax's chief economist.
Vendors, in recent months, have become considerably more realistic about what they can achieve for their properties
However, the Halifax said there were tentative signs that the slump in sales was now stabilising.
The number of new mortgages approved, but not yet lent, have risen in the past couple of months, while estate agents have been reporting a revival of interest from potential buyers.
"Vendors, in recent months, have become considerably more realistic about what they can achieve for their properties in the current climate, which is no bad thing," said David Smith, of Carter Jonas estate agents.
"It's realism like this that will bring the genuine recovery in the property market forward rather than put it off."
Regional difference
The Halifax's figures come shortly after the Nationwide reported that UK house prices fell by 0.4% in April.

Unlike the Halifax, the Nationwide said that the pace of decline in house prices slowed, but the typical home still cost 15% less than a year ago.
Recent figures from the Bank of England showed that the number of mortgage approvals made in March rose by 4% from the previous month, signalling the potential for more activity in the housing market in the coming weeks. However, approvals remain at a very low level compared with a year ago.
The Halifax data uses a measure to calculate the annual house price change which compares the past three months with the same quarter a year earlier, a method which it says irons out any short-term price fluctuations.
When comparing Halifax's average price in April to the value in the same month a year ago - as with other surveys - the figure is the same - a drop of 17.7%.
Prices in the three months to April compared with the previous quarter dropped by 3.3%.
The data showed that the cost to homeowners of making their mortgage repayments had fallen sharply alongside the Bank rate.
A borrower with an average outstanding mortgage of £107,000 has seen their monthly repayments fall by £111 since October 2008. Falling costs for individual borrowers are obviously dependant on the type of mortgage they have.
Although the Halifax data does not offer a regional breakdown in prices, the group said that areas outside the south-east of England had benefitted more from Chancellor Alistair Darling's decision to extend the stamp duty holiday for properties under £175,000 until the end of the year.
Some 18% of total sales were below £175,000 in London in September 2008 to January 2009, compared with 79% in the North of England.
From Forbes - a story about what the ECB may or may not do at their meeting tomorrow.

Expectations are that the base rate will have another cut to 1%. For mortgages in the eurozone this should mean continuing falls in the various Euribor rates. The monthly Euribor rate is now 0.9% reflecting the expected reduction. This means that mortgages in Spain based on the monthly Euribor can currently be arranged at around 2.4%.

The UK base rate is expected to hold steady. This has meant that the gap between UK and Eurozone rates will narrow. This has led to a strengthening in the pound, which is also good news for Brits with mortgages in the Eurozone, as they will have a reduction in their payments, and an increase in the amount of euros that their pound buys.

The market wants it to bring in quantitative easing on Thursday, but it could be disappointed.
LONDON--European investors are trying to figure out what the ECB will do to shore up the euro zone economy at its policy meeting on Thursday. Ever since the governor of the bank hinted that "non conventional" methods could be introduced at the May meeting, there has been frenzied speculation about whether or not it will join the Federal Reserve in introducing a form of quantitative easing, most likely by buying government bonds or corporate debt to get money flowing through the economy.
Europe's leading 50 shares were trading 0.4% higher at midday on Wednesday, led by the banking and insurance sectors. According to Ken Wattrett, a euro zone economist at BNP Paribas , the central bank will probably extend the maturity of its refinancing operations to 12 months, from six months and cut its repurchasing rate to 1.00% from 1.25%, a record low for the bank. The ECB will also probably keep its deposit rate stable at 0.25%. The big unknown is whether or not it will introduce a form of quantitative easing. Recent remarks by members of the ECB's governing council have suggested it is deeply split on the issue.
Britain's central bank, which also meets on Thursday, is expected to keep rates on hold. The Bank of England cut its benchmark borrowing rate to 0.5% last March and announced a quantitative easing program to buy 75.0 billion pounds ($100.0 billion) of gilts and corporate debt.
Recent data has presented a mixed picture of how far along the cycle the European economy is. While the closely-watched PMI index of services business activity for April saw its biggest gain in seven years, the European Commission has warned that the situation will continue to deteriorate and earlier this week said it expected the region's gross domestic product to shrink by 4.0% this year, and for unemployment to rise by 8.5 million, to 26.0 million. Similarly in Britain, the purchasing managers' index for April--which measures business activity--jumped unexpectedly to 48.7 from 45.5 the month before, but house pricess have continued to fall, sliding 17.7% in April on a year ago, according to the latest data from Nationwide.
Market sentiment about the banking sector was at least boosted by BNP Paribas on Wednesday. The bank reported profits of 1.6 billion euros ($2.1 billion), a smaller drop than the market had been expecting, due to strong investment-banking revenues at its fixed-income division. Shares of the bank rose 6.2%, or 2.62 euros ($3.5 billion), to 44.83 euros ($59.62), in Paris.

Friday, May 1, 2009

Bankruptcies on the rise

News about the massive increases in the numbers of people being declared bankrupt, and also about the insolvency courts in London, that are dealing with so many cases in a day that it can take only 90 seconds for a ruling to wind-up a company.

The way things are at the moment, if people have little equity in their properties, and a load of other unsecured debts, then the prospect of bankruptcie must be almost appealing.

I mean, you can go through some crap, but you've then got a clean slate. You can rent a place and all of a sudden you don't have any credit payments to make, you can still work, and have more money in your pocket each month
It might take a few years to be able to get credit again, but if people have little chance of clearing their credit in six years, why not dump the lot and wait for it all to drop off the credit score anyway?

I think that this is going to be an attractive option for many people over the next couple of years

Thanks for reading

Astonishing mess

The Treasury Committee have been putting the boot in on the banks in the wake of the credit crunch. Seems a bit rich to me really, considering that the Treasury Committee has ultimate responsibilty for the regulation of the financial systems.

From the Parliament website :-

The remit of the Treasury Committee, as determined by the House of Commons, is to examine the expenditure, administration and policy of HM Treasury, HM Revenue & Customs, and associated public bodies, including the Bank of England and the Financial Services Authority.

I'm not saying that it isn't the banks fault, but it just seems funny that it seems like a good subject for MP's to get themselves on the news about. Gordon Brown is getting his fair share of stick as the previous Chancellor, but the finger wagging from other MP's is a bit of the pot calling the kettle black

It's not as if the MP's have exactly covered themselves in glory recently. You could argue that bankers have been abusing the system for personal gain and without due care for the impact on the taxpayer

Hang on - doesn't that sound a bit like the MP's expenses debacle recently. Surely not.......

Thursday, April 30, 2009

Sorting the Spanish property market

There is one main way to rescue the Spanish property market and stimulate the whole economy as a result ;

Reform the expensive taxes and ridiculous purchase process

7% transfer tax, stamp duty, 1% here, 1% there, etc etc

Before you know it, purchasing with a mortgage is costing about 14% on top of the purchase price

Banks won't finance the purchase costs because they don't form part of the purchase price and aren't inherent in the value of the property

The Hacienda is collecting no taxes at the moment because the market is dead

So knock 6% off the transfer tax. Reduce stamp duty and notary fees and all the other shite

In fact, reform the notarial process, which is a complete waste of time, as all the dodgy fraudulent business that has gone on in Spain has all passed under the nose of a notary at some point in time. Who are they protecting ?

Without all the stupid costs there will be a much more fluid market when it comes to buying and selling in Spain


Here's a number for you :-


4 million

that's unemployed people in Spain, a country with a population of only 40 million, compared to the UK's 61 million

10% of the population

17% of the working population

Take out the little kids and the old ladies in black, and the old boys drinking in the ventas, and you have roughly one in six Spaniards without a job

So the working population is now supporting the kids, oldies, and a growing unemployed population

The government is collecting bugger all from property taxes, after creaming it for years

Income tax paid by workers will be declining

VAT on goods and services will decline as people have less to spend

Oh, and tourist numbers are expected to be down

I'm not sure how and when they are going to get out of this situation......

Tuesday, April 28, 2009

Daylight robbery

Landing at Malaga airport on Saturday I was due to pick up a second hand TV to give to our tenant in Calahonda, but I didn't have any euros on me in cash. So I went to the foreign exchange booth in the arrivals hall, and had a look at the prices. What happened next beggars belief;

The guy in the booth told us that the rate was 1.12, which souded pretty good as it has been around 1.10 over the past week.

I wanted to exchange 50 pounds, so the guy printed off the deal confirmation and started counting out euros.

I saw the deal sheet, and saw that he was going to give us 44 euros for my 50 quid

"Hang-on" I said, "this must be wrong"

"No, that's correct"

But the rate is 1.12, so for 50 pounds you have to give me about 55 euros

"No" he says, "you are buying one euro for one pound twelve pence"

An exchange rate of 0.88 cents to the pound. No thank you

I don't know if it is just a coincidence and a misunderstanding, but it seems deliberately obscure that the rate he told us was remarkably close to the pound/euro rate, but he was telling us the euro/pound rate !!!!!!!!!!

They must make an absolute fortune from people that don't notice, or are too dim to understand, and just hand over their readies and walk away with LESS EUROS THAN POUNDS


If the real rate gets below parity it will kill the european property market as far as the Brits are concerned, and those with euro mortgages would be in real trouble

Thanks for reading. If you want some decent advice on foreign currency exchange, send us an enquiry and speak to one of our professional partners here

Thursday, April 23, 2009

Congestion charge - you couldn't make it up

I have long been one to complain about the level of customer care in Spain in general, and Spanish banks like UCI and Solbank in particular. But since returning to the UK we have encountered a couple of ridiculous situations. BT was the first, which is ongoing, and covered in earlier blogs.
The second is the wonderful London Congestion charge. Here is what happened :-

The GLW (good lady wife) drives in to London, and her normal route blocked by roadworks, so she takes a detour and has to do a U-turn in a road which may be inside the charging zone.

She's not sure, but thinks we may have to pay the charge.

I go onto the website and follow the payment process

Put in her number plate and it identifies the make and model of car

Great , the system has recognised the car so it must have entered the zone, I thought

As a test, I entered the number plate for my car, and the system allowed me to start paying the congestion charge for yesterday

Hang on - my car didn't get within fifty bloody miles of the congestion zone yesterday!!!!!!

So I call them :-

"My wife thinks she may have entered the zone yesterday"

"Well you can check on a map"

"She doesn't know exactly where is was, so she isn't sure"

"Oh, well we aren't linked to the camera capture system"

"So you don't know and can't tell us if the car entered the zone?"


"So if I don't pay, because we aren't sure, then what happens?"

"Well if she went in the zone, you will get a penalty notice"

"OK, so if I pay, and she didn't go in the zone, then we get a refund?"

"No, sorry"

"Why not?"

"Because the congestion charge in non-refundable"

"But you are forcing me to pay, although you can't tell me if I need to pay, so if I didn't need to pay, I am wasting 10 pounds?"

"Sorry. We don't have access to that data"

Jesus. I spent years living in Spain not believing people that said how fucked-up things were here. How can they not tell you if you have to pay the charge - it just implies that you have to pay or suffer a bigger fine........

Tuesday, April 21, 2009

Buy to let fees

I have been looking into buy-to-let mortgages in the UK, having long been mildly embarrassed at the way in which Spanish mortgages are so damned expensive to set up, what with all the notary fees and taxes etc.
But I have seen that so called "best buy" loan in the UK seem to have setup fees of 3.5% or £1999, plus not fantastic margins above base.
So when we have a deal in Spain where the lender is willing to absorb most of the costs, then it doesn't make me feel so bad charging our fees, for what is, to be frank, a job that is both time consuming and fraught with hassle, with never any guarantee of success.
Holiday or investment homes in Spain are, for the most part, second homes, or buy-to-lets, even though that concept is a mystery to the Spanish.
Spanish banks are regressing in their products and willingness to do business. They are in about 1992 at the moment......

$4 000 000 000 000

IMF declares losses from the credit crunch could be 4 trillion dollars

$4 000 000 000 000

That's a four, and twelve zeros

That is a big number, and I'm someone that can remember when a billion used to be a lot

But where was this money, and where has it gone? Was any of it actually real ?

For sure the impact of it is real on real people's lives. Shame that those 12 zeros on a computer screen just can't be comprehended by the average Joe

Thanks for reading. Check out our website - apply for your 4 trillion mortgage here!

Wednesday, April 15, 2009

The great Euribor vs IRPH confusion

I keep getting clients contact me who are seeing the ECB rate dropping through the floor, and yet the rate which they are paying for their mortgage in Spain is not falling half as fast. Most of these people took their mortgages out in the good old days when the rates were about 3.5% and nobody cared what the basis was as long as the rate was good. Now many are discovering that they are not on the Euribor - which is the wholesale or inter-bank rate, but rather they are on the IRPH rate.
Of course, these rates were historically similar, so it didn't really matter. But now, the Euribor is reflective of the whole euro-zone, whereas IRPH is reflective only of happenings in Spain. The IRPH is an average of the mortgage rates charged by banks or caja's in Spain - there is an IRPH cajas, and an IRPH bancos, just to confuse things.
Anyway, as Spanish banks try to shore up their balance sheets, those that are lending or refinancing for their customers, are starting to charge much higher margins on their mortgage products, so now 1.5% is much more common than the standard 1% in the past. The upshot of this is that base rates may be dropping but in margin terms the banks are making loans more expensive, so the average for the IRPH rates are not falling as fast.
This effect could of course last for years, and when rates start to go up again, people with higher margin deals will find themselves struggling again. As Spain is now being identified as being in more serious mess than other countries, it seems likely that their banks will continue to push margins as the problems of the economy and unemployment grip.
Best solution, get your mortgage away from IRPH and onto the Euribor. Send us an enquiry and we'll see how we can help. Thanks for reading.

2 good news stories - I kid you not!

Today the BBC has 2 positive stories jumping out at me from the Business news page. This surely can't be that unusual, but it seems to be so long since there was good news of any kind, that caused me to sit up and take note. Of course, there's a good half dozen rotten news stories to dampen the mood, but I won't dwell on those today.
The good news stories have an undoubted relevance to the Spanish mortgage and property markets. First of all, the news that new property enquiries in the UK have increased significantly, although sales remain low. This means that these consumers are obviously attracted by the price reductions, and are maybe not so negative about the economy as a whole. As we know, people that are still employed should be much better off because of falling mortgage rates, so it would seem perverse for people with more money in their pockets to be negative for too long.
If there is more confidence in the UK property market, then there will be a knock-on effect in the Spanish market. There are undoubtedly bargains to be found in Spain, and people that feel that the UK market is recovering will have more confidence to invest in Spain.
The news from surveyors in the UK has impacted the strength of the pound, which is of course good for anybody paying a Spanish mortgage at the moment, and also good news for anyone planning to buy a property in the eurozone, as their pounds will buy more euros.
Of course, 1.13 to the pound is nothing like it was at 1.45 a few years ago, but any small rises are welcome.
Then there is a diary entry on the BBC site from an anonymous banker in London, suggesting that RBS are going to be back in the lending arena big time in the next few months, and they may be a month or so behind Lloyds HBOS.
Amazingly, somebody has remembered tha banks make profit from lending money to people! Lending 60, 70, or 80% of the property value to normal people is not high risk business - at least not compared to the sub-prime stuff and other dodgy investments that they were chucking billions at.
In Spain we have Halifax re-entering the mortgage market to a degree, and offering to pick up the tab for the considerable costs of remortgaging, and giving a few years of interest only. They are only doing 60% and are fairly rigourous in their application process. Even so, people switching 100,000 euros mortgage to the Halifax in Spain on interest only at the moment can expect to pay a whopping 217 euros a month for the priviledge. How may people are going to default against that - not bloody many I can tell you, particulary if they had been on a repayment at 5%+ with one of the increasingly unfriendly Spanish banks.
So if you are stuck on a high rate and sending too many hard-earned pounds over in exchange for not-many euros, then give us a call and let's see if we can help - 01621 785204 Thanks for reading.

Monday, April 6, 2009

Spain and Madoff

I was listening to Peter Day's World of Business podcast yesterday, in which he explores the effect of the recession on some of the countries of Europe that had less historically developed economies, including Spain. He was interviewing a broker, now unemployed, who had been selling investments in the Bernie Madoff ponzi scheme. He was saying that it was impossible for him to find a new job at the moment. They also discussed the likelihood of Spain's unemployment reaching 15% of the workforce, which is a staggering figure.
I don't know if it is that they didn't believe it could happen, or simply deluded machismo on behalf of the Spanish banks and Government. Either way, they didn't see the property crash coming, ignoring the fact that bubbles always burst, and they denied that there was any exposure to the sub-prime markets and scandals affecting other countries. We have just seen the first rescue of a Spanish bank, and it surely must be the first of many. I have been saying for years that there were too many banks and far too many branches, kitted out like little offices with a manager and a handful of staff that sat around pretending to work all day. Still the managers that I deal with deny that there are any problems with their own banks...........

Friday, April 3, 2009

Meeting Obama - well, almost.

Sitting in traffic yesterday on the way into London, just about to enter the Limehouse link tunnel, when a stream of several motorcades flew past on the other side of the road, carrying the G20 (possibly a boy-band) to a concert at the Excel centre. We knew it was them as the radio news was saying that they were all arriving for the summit. Loads of people complaing on the phone-ins about the cost of the whole event, in the circumstances, although 20 million quid really is just a drop in the ocean. But they could have flown them all to Jersey or somewhere, which would have saved a fortune and stopped all the protests kicking-off. And now we have seen lots of self-congratulatory pics and newsbites about how they have all agreed to invent lots of money to pump in the financial systems and sort out the global problems. Whether or not this will help remains to be seen. Clearly there have been some monumental banking screw-ups that have been going on for a number of years, and there is some reluctance to return to what keeps being referred to as "normal" lending. I don't think that a situation where the majority of adults in the UK have thousands of pounds of unsecured debt on loans and credit cards is particularly normal, just that it has ended up being common. People don't necessarily need access to ever increasing levels of credit, but if someone wants to move house, or change car etc, then redeeming loans and taking new ones simply oils the wheels of life. Better regulation is certainly needed for consumers and the amounts that they can borrow, but that will always grate with the people that insist that they can service more debt, and there will always be another credit card and balance transfer that can be used to borrow more.
Mortgage lending in the UK was up in Feb, a good sign, and net credit was down, so have people started paying back more, perhaps because of falling mortgage payments leaving more cash available?
How will this help this in the Spanish mortgage and property market ? This also remains to be seen as I think we are certainly behind the curve of the UK. If people have confidence and ability to borrow in the UK, then perhaps that holiday home / investment will again feature on people's minds.
What is going to happen with sterling though, is anybody's guess.......

Tuesday, March 24, 2009

Horse, stable door, bolted....

A number of stories coming out of the UK regarding the mortgage market and potential regulation of maximum LTV’s and multiples of income.
In terms of the LTV’s clearly the notion of 100% or more is crazy. It’s shocking that Northern Rock continued to lend 120% mortgages even after they had been bailed out. These loans now make up a large proportion of the banks defaults, and it’s really not surprising. If prices fall 20% then there’s 40% of negative equity in the property. Here you are Mr Rock, have our keys back, we’ll go rent somewhere for half the price until the dust settles.
Offering loans to valuation in Spain has caused a big problem in the past, as it was often open to manipulation and left people with cash in their pockets and all fees paid. In fact, it was possible with larger properties that people walked away with hundreds of thousands of euros in their back pockets and little or no incentive to pay the banks back. Now it has gone back the other way too far, and banks are limiting the lending to the lower of price and valuation. This would be OK if they were still offering 80%. At 80% plus the mortgage expenses and purchasing fees, the customer is still having to fund 30% or more from their own pocket, even if this was an equity release from the UK. So a significant input from the purchaser which they wouldn’t want to lose under normal circumstances.
When it comes to affordability, they seem to be missing the point entirely. Allegations are flying around about the fact that some lenders have offered mortgages at 5,6,7 or more, times the household income. They seem to ignore the impact of interest rates on the affordability of people, and the monthly cost of the mortgages. If rates are relatively low and stable, then 6 times income may well be comfortable for many people, particularly if their other outgoings are not too high. The Spanish model, generally used, is better but not perfect. All finance outgoings not to exceed more than about 35% of net monthly income. Of course, this still can’t allow for future changes in interest rates. Of course, everything is dependent on past events when it comes to lending, as nobody knows what the future holds – there are several hundred thousand people in the UK that are now unemployed and have seen a significant drop in income, that they would not have expected a year or two ago, plenty of these in seemingly “safe” banking jobs. The percentage model, used in Spain, discriminates against those with higher incomes, as people with plenty of net disposable income will often find themselves unable to borrow in Spain, because they may have car loans and mortgages etc that take them close to or over the 35% already. So, what is the answer for “safe” levels of borrowing and lending? It seems to be something of a conundrum when you have lenders that are in a competitive market, and borrowers that are demanding more and a housing market that has relied on the next person being able to get a bigger mortgage as each home increases in value. Of course, many people that have been granted mortgages, have subsequently been able to load up on credit after they have bought their properties, for home improvements and furniture for the new pad. So, if the lender would look at their client’s credit report 6 months down the line, it may be that they would not choose to give the funding at this time.
Perhaps a way forward would be for borrowers to be more “tied” to one lender. I don’t think it would be possibly in terms of regulation, but consider the scenario if your mortgage lender could veto any other loan or credit applications before you were allowed to take them out? Or if you were only allowed by law to borrow from the same lender that holds your mortgage – so your current account and overdraft, mortgage, cards and personal loans are all part of one flexible funding package ? A nightmare for competition law, but it would make it harder to borrow from every credit card provider going – I mean, did MBNA ever turn anybody down ?
Common sense around the world would seem to be the way forward, but how do you regulate things when mortgages in the US were handed out to anyone that could sign their names, and the same mortgages became “investments” that bankers around the world could buy and earn themselves fat bonuses? Banks should basically be operating in a perfect market, in it’s simplest form being the concept of borrowing (at interest) from savers or from central or wholesale banks, and then lending at a higher rate to people that want to borrow. The bank earns a margin on the difference which they use to pay their overheads, which leaves a profit. Simple and understandable. Problem is, when you add greedy motivated and error prone humans into the mix! Send us a mortgage enquiry from our main site.

Waiting for BT......

Sitting here in the agricultural outpost of Essex, we have now been waiting for BT to come and install our phoneline, broadband and TV system for, oh, 3 weeks already. Having been ordered a couple of weeks before we moved in. First of all they couldn’t find the address on their database, even though there had previously been a BT line and broadband at the house in the past. Then, we thought that had been sorted out, as a few days before the supposed installation date, we first of all received the BT Vision decoder box in the post, followed closely by the wireless hub and a couple of telephone handsets. So we are sitting on all this equipment, waiting for the engineer, when a letter arrives asking for us to call BT as they hadn’t been able to get in touch with us. We call, and they say that they hadn’t been able to resolve the address problem, so had cancelled the installation. Perhaps they should have posted the engineer along with the equipment, as all of that had found us with the postman! So then they try and book another engineer for the 2nd of April, another 2 weeks to wait. Kicking up a stink got that reduced, but it was still and extra week on top of the original installation date. So I hope I’m not tempting fate by writing this, but hopefully it is going to be my first blog post when they finally turn us on this afternoon. Then I can really get my teeth back into working, as the good ships Europa Mortgages and “amortgagein..” have been running at less than full steam these past weeks. You forget how much our lives rely on being online, and simply being able to download emails a couple of times a day is just not enough. So, full steam ahead from later today, I have a load of news feeds and website updates, and will be adding content to , , and Thanks for reading. Keep coming back for updates.

Wednesday, March 18, 2009

Spanish doom and gloom

It's that time again when a huge plethora of news stories and statistics seem to all come out at the same time, and most of them have downward pointing arrows. Sales in Spain are down, rental income in Spain is down, and the middle classes in the UK are having more trouble paying off debt than ever before.
It's interesting to wonder about the knock on effect of things as they spiral downwards; People struggling with debt in the UK are finding it more difficult to pay their debts, so may not go on holiday this year, which means that people with overseas property will have less rental income, so will struggle more to finance their holiday homes, which will leave less money to spend in the UK, and make it more difficult to pay debts in the UK.
So that seems to inevitably lead to more repossessions home and abroad, which gives the banks the willies and makes them more reluctant to lend on good terms in the future.

So, even though we seem to have historically low interest rates everywhere, how come so many people are struggling with debt? Is it because over the last few years it was just possible to get more debt to service your existing debt ?
Most people with existing mortgages must have lower payments at the moment, so they must have spare cash to pay towards other credit - no?

The problem is that we have become so used to our economies being driven by what is essentially invented money. It doesn't really exist other than it has supposedly been borrowed centrally by a bank (and guaranteed by their assets worth jack-shit) and then lent to a customer at a higher interest rate, which they have spent somewhere in the economy. At no point does it seem to be real money that you can touch and feel.
What happens to things when all that has gone? I think we are going to find out........

If you are interested in obtaining a Spanish mortgage or remortgage quote send us an enquiry from Europa Mortgages

Wednesday, March 11, 2009

Last Man Standing

We hear rumours from one of our lenders that they are intending to increase the margin above the Euribor for their Spanish mortgage products. They are pretty much the last lender that is offering interest-only deals for more than 60% of the value of the property – their 65% option effectively being the market leading deal at the moment. They must be getting floods of applications for this deal as clients look to switch from expensive repayment loans to more manageable interest only mortgages. Of course it looks like an opportunity for them now to increase their margins and fix a higher profit for themselves for however long the client has the Spanish mortgage for. So in the event of a recession that may last 2 or 3 years at most, they could be locking customers into 40 year mortgage deals at a high margin over the Euribor, in a mortgage market where switching lenders is ridiculously expensive to do. So in a way they can’t be blamed as they are the only lender sticking their neck out at 65%, when the rest of the crowd sit at 60% LTV or less. Come on guys – 40% equity in a property – how much security do you need ? It is of course the banks that have been the driving forces behind all the crap that is going on, with hugely irresponsible lending and investment practices in products and vehicles that they didn’t understand fully, and in some cases make no sense at all. They people that didn’t cause the recession are Mr and Mrs average that bought a Spanish holiday home where they have put in 20 or 30% plus 10% of costs themselves. The vast majority of Spanish homeowners have made significant contributions to purchasing their properties, and most of them are on repayment loans, probably at 70% or more. Surely there isn’t much risk to the lenders in taking on those loans at 70%, interest-only (which is more profitable in the long term as capital remains constant) then it reduces the customers’ outgoings, giving them more disposable income to either save or spend in the economy. If things continue like they are, then the mortgage products available in Spain will just not be any good for the vast majority of potential borrowers. Then the lenders will start asking us brokers where all the customers have gone (if there are any brokers left by then)
Will keep updating the blogs as things progress. Thanks for reading.
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Thursday, February 19, 2009

The latest Spanish bank con!

Various news stories emitting about Spanish banks setting up real estate divisions to take on board their repossessed properties.

Here is the deal, they offer to buy the property off of the client for the amount of the outstanding mortgage.

So even though the client may be only a few payments in arrears, and in most cases has put in 30% at least, plus costs, they are only going to take the house for the value of the mortgage.

Then, they can hold the property for a few years, and sell at a profit, as they have bought them at large discounts!

Plus, for the Spanish regulators and their shareholders, they can call a 350k property an "asset" on their books, not a 350k unpaid debt !!!!!!

As I have mentioned before they are not willing to admit to the problems, even though it is clear how much shit they are really in. They are just playing with numbers to hide the issues under the carpet.

Thanks for reading. To find out more send us an enquiry.

Tuesday, February 10, 2009

Mortgage in Murcia - no can do.....

Getting a mortgage in Polaris World has been problemmatic for a while. Leeds Building Society won't touch the place, along with a number of other banks. Valuations have been poor for a while, and the sentiment is that there are an oversupply of properties, that were built cheaply, and many of them to clients that won't be able to complete on the purchase or service the mortgage.

Today though, I approach one of my Spanish lenders with details of a new (good quality) client, that is purchasing at Polaris World, to be told that they won't lend in Murcia !

Not just Polaris, but the whole flipping region!

This just seems to be getting worse, and the banks are supposed to be lending normally !!!!!!

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