Europa Mortgages Worldwide

Spain's consumers lose heart

2011-01-05T07:50:00.000-08:00

A story from Reuters earlier today

Spain's key services sector --
more than 60 percent of the economy -- shrank at its fastest
pace in a year in December when consumer sentiment slid anew,
overshadowing an above-expectation rise in industrial output. Since Spain's property bubble burst in 2008 unemployment has
soared and increasingly gloomy consumers have abandoned the high
streets and restaurants, hitting the key services sector and
reinforcing worries over the economy's ability to recovery. "The headline PMI is consistent with stagnant growth. Our
view remains that Spain will fall back into recession this year
and, even if it doesn't, growth will be worse than government
forecasts," Capital Economics economist Ben May said. The euro zone debt crisis, which gained pace in November
after Ireland was forced to seek an EU/IMF backed bailout, has
stunted a recovery in the blocs' peripheral countries and
highlighted their disparity with the core economies.
"Near-record growth in Germany and strong expansion in
France contrasted with a collapse in growth in Italy to
near-stagnation and increased rates of decline in both Spain and
Ireland," said Chris Williamson, chief economist at Markit. Investor concern the Spanish economy will be unable to
restart after stalling last year following a prolonged recession
has pushed up bond yields and fuelled expectations the
government will be forced to apply for EU/IMF aid. The premium investors demand to hold Spanish debt over
German Bunds was around 244 basis points on Wednesday, below
euro-era highs touched at the end of last year but a long way
from the around 70 bps before the euro debt crisis began.
Markit's purchasing managers' index (PMI) of Spain's
services companies was below the 50 mark which divides growth
from contraction for the fifth straight month in December,
showing the economy is still struggling. November calendar-adjusted output rose 2.3 percent, the
National Statistics Institute said, far above a Reuters poll of
-3.4 percent, supporting government hopes of fourth quarter
growth, but clouded by continued gloom from consumers.
CONFIDENCE FLAGS Consumer confidence fell to 64.6 points in December, down
from 70 points a month earlier and the lowest recorded level
since May 2009, the Official Credit Institute (ICO) said on
Wednesday. Overall confidence was dragged down by a deterioration in
sentiment toward the current economic situation and expectations
for the economy going forward, ICO said. Prime Minister Jose Luis Rodriguez Zapatero has said the
country will beat public deficit targets of 9.3 percent of gross
domestic product and that the economy will grow in the fourth
quarter of the year. The government expects the economy to have shrunk 0.3
percent in 2010 and to grow 1.3 percent this year, a forecast
considered optimistic by many economists. November industrial output was boosted by the energy
component, which rose 7.7 percent year on year and was probably
lifted by harsh weather conditions, economists noted. But analysts were focused on the way shoppers were keeping a
tight hold on their purse strings. "PMI services is much the same story as we had on the
consumer component in industrial production, which is that
spending is constrained by the fiscal retrenchment and this is
reflected in the services component," economist at Deutsche Bank
Gilles Moec said. The Socialists have passed austerity measures last year
aimed at saving more than 50 billion euros ($66.40 billion) but
have said short-term growth would be boosted by rising exports. "Capital goods and intermediate goods, normally driven by
exports, are doing fine and this is perfectly consistent with
news on exports and the rebound in manufacturing PMI we had
earlier this week," Moec said.

Why mortgages might be Spain’s next headache

2010-12-27T16:25:00.000-08:00

Are mortgages the next headache for Spanish banks? Regulators think the country’s 630 billion euro home loan market can survive the slump relatively unscathed, just as in the last real estate crisis of 1992-1993. Spanish banks’ biggest problem is bad loans made to real estate developers. But it would be optimistic to assume that mortgages will emerge unscathed.

In a recent presentation, the Bank of Spain pointed out that conditions in 1993 were tougher than they are now.
Unemployment hit 24 percent and interest rates soared to 13.9 percent, compared to 2.6 percent today. Even then, only 4 percent of mortgages went sour. And banks were able to sell repossessed properties after the bust without incurring losses.

There are grounds for optimism. Despite falling property prices, Spanish home loans are on average worth just 62 percent of the value of the property. These loans are recourse, making it harder for borrowers to walk away. Spanish families will often help overextended homeowners keep up their mortgage payments. This is reflected in banks’ data: the proportion of mortgages classed as non-performing has fallen to just 2.6 percent.

But today’s real estate bust is worse than in 1993. Spain started building 760,000 new homes in 2006 — almost four times as many as in 1992, even though the population has grown by just 13.5 percent. Most analysts predict Spanish house prices will fall 25 percent from the peak, twice the 12.8 percent drop to date. According to RR Acuna, a consultancy, Spain has 1.5 million unsold homes — about 6 percent of the total stock. These will act as a drag on prices, making it hard for banks to sell foreclosed homes at a profit. Moreover, households are more indebted than in 1993.

How bad could it get? If delinquencies on mortgages reached, say, twice the 1993 peak, banks would have 50 billion euros of troubled loans. Even then, this would be less of a headache than lenders’ 180 billion euros of potentially troubled exposure to construction and commercial real estate. Eventual losses would also be much smaller. Nevertheless, it’s hard to argue that mortgages will not be a problem.

Spain must act to capitalize banks

2010-12-27T15:20:00.000-08:00

The last time

2010-12-27T15:15:00.000-08:00

This is the last time I'm going to get caught up in the great Christmas shopping scam. The retailers have this perfect date of the 25th December which forces the vast majority of people to spend hundreds of pounds on Christmas gifts. And then, on the 26th or shortly after, prices drop through the floor, and we are bombarded with ads for 40 or 50% off. In our local shopping centre today, I was completely pissed off with seeing things that I had paid full price for, at 50% a few days later. The worse thing is, we know this is going to happen, and still most of us fall for it. Not me, not again next year anyway.....

More bloody snow

2010-12-20T11:26:00.000-08:00

So, here we are, in the last few working days up to Christmas, and the whole bloody country seems to have ground to a halt again because of the snow.
I live near Gatwick and the news reports are full of stories of people stranded at the airports either trying to get away or trying to get home somewhere before Christmas. The news channels must be loving it - they can spend the whole day going live to helicopter shots over the M25 or Gatwick.
Also, we hear that retailers have seen their share prices fall, as people just haven't been able to get to the shops. One wonders what will happen to the boxing day sales if people haven't been able to get to the shops before Christmas day.
Of course, Christmas is the ultimate shopping scam anyway, in terms of forcing people to buy before the 25th, even though we know that prices will be lower on the 26th.
In economic news we hear from the CBI that they have scaled down their estimate for 1st quarter growth to an insipid 0.2%, with not much improvement through 2012. There also seems to be some expectation that interest rates will have to rise, to help curb inflation. Given that we are all going to be hit by higher VAT and other increases next year, that's hardly going to be welcome news. In terms of people with Spanish mortgages or other euro mortgages, there may be a small upside as the pound may strengthen with higher interest rates. Whatever happens, it looks like being a tough 2011.....

Poor sales to non-residents in Spain

2010-12-19T10:11:00.000-08:00

Amazing property sales figures for the last quarter show that the number of properties sold to non-residents was, wait for it, 490. Yes, 490, in the whole of Spain!
I would imagine that a few years ago there would have been some large agents that would have expected to sell 500 units in a quarter!
So it seems that, even with falling prices (supposedly) the foreign buyers are hardly falling over themselves to buy places in Spain.
Clearly everyone seems to have their own economic problems at home, and the outlook for Spain seems to be shaky at best.
Also, although the banks can be identified as being the cause of a lot of problems with their easy lending practices, the current best offer of 60% LTV is not really very enticing for non-cash buyers. You are going to need 40% deposit plus up to 15% to cover all the costs - about 55% of the total purchase price. It's not difficult to see why the sales are so low.

Explaining the Sub-prime mortgage mess

2010-12-19T03:40:00.000-08:00

How the Irish Bailout works

2010-12-02T11:32:00.000-08:00

It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt and everybody lives on credit.
On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note onthe desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel.The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the pub.The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit.The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.The hotel proprietor then places the €100 note back on thecounter so the rich traveller will not suspect anything.
At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money and leaves town.No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.
And that,ladies and gentlemen, is how the bailout package works.

Spains banks seen as weak links

2010-12-01T13:45:00.000-08:00

(Reuters) - Mounting bad loans, competition for funds and exposure to wobbly Portugal make Spain's banks a potential liability as the country fights to avoid an Ireland-style bailout.
A burst property bubble also weighs on the sector, but the immediate worry is over the spring of next year when both the banks and the government will be in the market for a combined 50 billion euros ($66 billion) of funding.
"Problems may well arise when banks need to turn over debt at the same time as the government if confidence remains low," said Javier Bernat, analyst at Caja Madrid.
A wave of consolidation and conservative rules have supported the banks so far, but after Ireland accepted an 85 billion euro aid package, investors are turning their eyes to Portugal and Spain.
In the larger economy, mid-size banks such as Banco Sabadell
and Banco Pastor are seen as potentially the most vulnerable.
They were frozen out of European interbank markets earlier this year, and are not as diversified as global giants BBVA and Santander.
Capital requirements for Spanish banks have traditionally been more stringent than in other countries and the average core Tier 1 capital of the sector was 7.7 percent under a crisis scenario in July's Europe-wide stress tests.
But the bar has been raised for all banks since then, as new capital rules have been agreed, leaving Spanish banks looking less well capitalized than many international rivals.
The weakest link in Spain's banking system are regionally focused savings banks -- who had an average core Tier 1 capital ratio of only 5.5 percent in the stress tests. They have already gone through a forced consolidation process that has cost the government 15 billion euros in credit lines.
Shares in Santander, the euro zone's biggest bank, sagged 3 percent to an 18-month low on Tuesday as worries about the sector grew.
Spain's economy is larger than those of fellow euro zone peripheral countries Ireland, Greece and Portugal combined, and if it spirals into a debt crisis despite progress cutting its budget deficit, a bailout would strain the European Union's safety net.
With the economy stagnant and spending cuts landing, market jitters over possible bank funding problems have pushed up financing costs for Spain to euro-zone lifetime highs of about 5.4 percent for 10-year sovereign bonds.
Another source of concern is heavy exposure to Portugal, which is seen as the next euro zone trouble spot. Spanish banks had a $108 billion exposure to Portugal at the end of March, according to Bank of International Settlements data.

Is Eurozone heading for triple meltdown again ?

2010-11-16T02:09:00.000-08:00

News stories and podcasts are very much focussed on happenings in Ireland and the reluctance of the Irish to accept an EU bailout except on their terms. In many of the stories, the subject of Greece often comes up, and we are reminded that that particular problem was very recent and still hasn't actually gone away. European bond markets are reacting badly to the news, which threatens to drag Portugal and Spain into the mire. The PIGS have long been identified as the EU's biggest problems, and it now seems likely that they could all be the receivers of some kind of bailout. Ireland could have a big knock on effect in the UK, as it seems that much of the debt of Irelands banks is held by UK institutions, so the debt malaise could spread.

Is Ireland heading for bailout ?

2010-11-12T03:25:00.000-08:00

The pressure seems to be increasing on the Irish economy, amid signs that the country may be heading for a Greece style bailout, much to the chagrin of the Germans, who are frankly fed up with having to help the basket cases that they are lumped in with in the EU.
The Irish economy and people benefitted more than most from entry into the Euro, as house prices went through the roof. In Spain, it seemed that for every Brit buyer, there was an Irish buyer, quite extraordinary given the relative population sizes. Of course, lots of these Irish people that had taken equity out to buy in Spain and elsewhere, are now in negative equity at home, or having problems making payments, so there will be a likely knock-on effect on their holiday homes and investments in Spain, with Spanish mortgage payments likely being secondary in importance to the Irish mortgage for their main home. Given that the Spanish economy has stalled again, it's a double whammy that one of the nations that was so enthusiatic about investing in Spain is in so much shit too.....

Spanish Recovery stalls

2010-11-11T06:57:00.000-08:00

Spain's fledging economic recovery came to a stop in the third quarter amid tough austerity measures, official data showed Thursday, hindering government efforts to slash the soaring jobless rate.
Gross domestic product showed zero growth in the three months to September 30 from the previous quarter, the National Statistics Institute (INE) said in a preliminary estimate.
It followed growth of 0.2 percent in the second quarter and 0.1 percent in the first when Spain emerged from one of its worst recessions for decades.
Spain, a member of the eurozone, has the fifth-biggest economy in the European Union.
A recession is defined as two quarters running of shrinking growth from output in the immediately previous quarter, so a month of zero growth is a cause of concern for policymakers.
The data also comes at a time of renewed concern in eurozone bond markets about high debt and low growth in weaker eurozone members Ireland and Portugal, following the Greek debt crisis earlier this year.
On occasions this year, Spanish bonds have also been affected by strains on the bond market where there is concern that austerity needed to control overspending could tip some countries back into recession, cutting tax revenues and adding to their problems in controlling budgets.
On a 12-month comparison, Spanish gross domestic product expanded by 0.2 percent after seven months running of declines by this long-term measure.
The government said the flat growth would impede its battle to slash the unemployment rate of more than 20 percent, the highest in the 16-nation euro zone.
"It is not possible to create employment" with zero growth, Employment Minister Valeriano Gomez said.
"Spain still needs to grow by 2.0 percent to create employment," he told Cadena Ser radio.
He forecast that employment would pick up in the second half of 2011, with an additional 40,000 and 50,000 jobs created in the year.
The INE said the latest figure reflects lower national consumption compared with previous quarters.
The figures confirmed estimates by the Bank of Spain last week, which forecast "a weakening of economic activity, of a transitory nature, due in large part to the depletion of some expansive factors."
"These include the impact on national demand of the budget austerity measures adopted in May," it added.
The government has suspended dozens of road and rail projects and cut civil servants' wages as part of deep spending cuts aimed at reining in the massive public deficit.
It has forecast the Spanish economy will shrink by 0.3 percent this year, following a fall of 3.7 percent in 2009.
In May it lowered its growth forecast for next year to 1.3 percent from 1.8 percent due to the impact of the tough new austerity measures.
The government aims to bring the public deficit down to 6.0 percent of GDP in 2011 and to the eurozone limit of three percent in 2013. The deficit hit 11.1 percent of GDP last year, the third highest in the eurozone after Greece and Ireland.
The measures were introduced at a time of rising fears that Spain and other southern members of the eurozone could follow Greece into a financial crisis.
The Spanish economy slumped into recession in 2008 as the bubble burst on a decade-long property boom and amid the global financial meltdown.
The INE is to release definitive figures for the third quarter on November 17.

An interesting house to rent

2010-11-10T05:27:00.000-08:00

We just went house hunting at the weekend, looking for somewhere to rent. Our landlord in the UK has told us that he intends to try and sell our current abode when our contract expires, in August 2011. Yes that's right, August next year. In true style then, my GLW (good lady wife) has already started looking....
And what happens when you look for a house? - lo and behold, you find somewhere that you really like!
Anyway, the interesting thing about this house, is that it was owned by a builder that went bust, and is in major hock with the bank. So the bank have come in and finished the project, and are left with a property that "owes" them more money than they could comfortably recover with a sale.
So, rather than liquidate the loss, the bank (we don't know which one) has decided to become a landlord for a few years - I guess they can at least get some income and hold an "asset". So, we may have a bank as a landlord for a couple of years, as long as they drop the asking price enough that we can afford it - nice place though.........

More BTL mortgages available again in UK

2010-11-04T07:23:00.000-07:00

A recent financial adviser confidence tracker report suggests that availability of buy to let mortgages in UK has improved.
As many as 43% of surveyed mortgage brokers said that the number of available deals increased in Q3 2010. Another 38% said they have not noticed any changes in the number of mortgage deals for property investors, and only 19% of respondents said the number of available loans fell.
The survey also found that 58% of mortgage brokers expect the situation on the market not to change significantly in Q4, whereas 35% hope it will get even better. The remaining 7% think the availability of buy to let mortgages will decline.
The report comments that the market has significantly improved in the past months, however, it still is not back at its pre-crisis level. Many professional buy to let landlords still find it hard to access loans.

Unemployment in Spain rises again

2010-11-03T02:18:00.000-07:00

Unemployment in Spain, which has Europe’s highest jobless rate, rose for the third month in October as the economy struggles to recover from an almost two-year recession.
The number of people registering for unemployment benefits rose by 68,213, or 1.7 percent, from September to 4.09 million, the Labor Ministry in Madrid said in an e-mailed statement today.
Given that the construction industry in Spain looks to be well and truly screwed, at least for a few years, it's quite difficult to see where they are going to create many new jobs from. There aren't that many industries in Spain that have a true international appeal or weight, aside from a small number of high profile ones - Seat, Ferovial, perhaps.
And with this level of unemployment comes a double whammy on the eceonomy - higher benefit payments for all those people, and less spending in the economy, with loans and mortgages under increasing pressure.
Spain’s unemployment rate, double the European average, fell in the third quarter to 19.8 percent, even as Prime Minister Jose Luis Rodriguez Zapatero said the number should be viewed with “prudence.” The economic recovery probably slowed from July to September, Bank of Spain Governor Miguel Angel Fernandez Ordonez said on Oct. 5, as the government tries to slash the euro region’s third-largest budget deficit with the deepest austerity measures in at least three decades.

Back in austerity Britain.....

2010-11-02T09:35:00.000-07:00

....I seem to have acquired another job to go with the, admittedly quiet, overseas mortgage broking, and the current day job in the music business. I am getting involved in an online gambling business to help out the owner, who is an old mate. So in a time of rising unemployment I could be working 3 jobs "to make the rent", as they say in the US. When things start looking up and the mortgage business starts flowing again I could be a very busy boy. Bring it on I say.

Sunny Spain

2010-11-02T09:12:00.000-07:00

Just back from an enjoyable week in Southern Spain, where the fine autumn weather with temperature in the mid 20's felt a world apart from miserable grey Britain.

There still seems to be an awful lot of half finished apartments blocks, and the buzz that existed 3-4 years ago has well and truly gone. The building sites look even worse now the scaffolding and machinery has gone, and I can't see that they are coming back any time soon.

Part of the problem affecting sentiment in Spain still seems to be a complete mistrust of the banks and any official figures. The government says prices are going up, and the largest valuation company says they are going down. And the banks seem to be under suspicion of completely underdeclaring the true value of the repossessed properties on their books. We have friends with an apartment in Calahonda and the bank have completely stopped communicating with them, not chasing for money, not sending warning letters, or threats of repossession. They fully expect to lose the apartment, but in the meantime they are mortgage/rent free - they hav e no incentive to pay when the mortgage is higher than the purchase price would be for the apartment next door, it's an incredibly tricky situation.

Bank debt worse since 1995

2010-07-19T06:51:00.000-07:00

Bad debt in Spain has reached its highest level since June 1995 with the number for May climbing to 5.707%. It means that the amount of doubtful credit increased by 476 million € in just a month.

Once again it is the Caja savings banks which carry most of the bad debt, according to the data published today by the Bank of Spain. They have had a bad debt level over 5% for the past 14 months.The total volume of doubtful credit at banks, savings banks and cooperatives is now 95.291 billion €.

The Bank of Spain considers credit as doubtful when an individual or a company goes three consecutive months without payment.According to the Spanish Chambers of Commerce, 85% of Pyme small businesses are ‘sweating’ to find finance. They say that the number of companies applying for grants is up, and many are finding it had to get paid by pubic bodies. As many as 85.4% said they had come across the problem in the second quarter of the year.

Air traffic controllers have denied that the high numbers of workers from Barcelona off sick on Sunday, and to a lesser extent again today, is an undercover strike. Delays have been seen as a result, most on flights to Barcelona, Alicante and the Baleares. An investigation has been ordered by the Minister for Development, José Blanco, but the controllers are adamant that all the sick leave is accredited and any delays are ‘normal and less than in other countries’

Telefónica has taken the first step to break its alliance with Portuguese Telecom. A firm of lawyers has been taken on to try to dissolve the alliance the Spanish company has with its Portuguese counterpart in the Brazilian company Vivo.Counterfeit Euros are still being produced, but on a lower scale than before. During the first six months of this year there was a 13% fall in the number of fake notes impounded by the authorities. Even so, over the first six months of the year a total 370,000 fake notes were taken out of circulation, according to the European Central Bank.Gas Natural Fenosa has won the tender to improve the energy efficiency in the Ministry of Industry building in Madrid. Savings of at least 10% are now expected in the ‘Cuzco complex’ building which is also home to some of the offices for the Ministry for the Economy and Hacienda.The President of the CEOE employers’ organization, Gerardo Díaz Ferrán, faces court after five employees of the Air Comet company are demanding their pay dating from October and November last year, when he was still the owner of the airline. The first case reaches court in Madrid on Wednesday next week.And finally,Filling your car tank with petrol or diesel will cost you about 10 € more than a year ago. Over the past 12 months diesel has risen in price by 19% and petrol by 13%.Read more:

Exchange rates report

2010-07-14T08:32:00.000-07:00

Please find below the latest currency exchange report from our friends at Foremost Currency Group.

EUR

Over the past week we have seen a steady decline for the Sterling-Euro currency pairing. With the bearish sentiment expressed towards the pound, Euro prices fell 1.6% over the week to a low of 1.1928 from previous highs just pushing over 1.21. Sterling began to slip on Monday after a weaker than expected reading of the UK services sector highlighted the fragility of the country’s economic recovery and thus prompted investors to take their profits from the pound’s rally over the last few weeks. With an increase in the supply of sterling on the currency market, prices naturally began to fall.

With few news releases holding much impact for the currency pairing this week until Thursday, the ongoing situation for BP as well as the aforementioned profit booking eroded the previously seen sterling strength, although at a pace subdued by weak GDP growth figures in Europe.

Financial talk within the UK recently has focused on the possibility of a ‘double-dip’ recession and the impact it would have. Whilst the risk of Britain sinking back into a period of declining economic growth has grown in recent months, a 12-strong team of respected economists and business leaders on the Sky News Money Panel unanimously made the call that the the UK would avoid a double dip. They confidently and correctly asserted the Bank of England would make no monetary policy changes following the July interest rate meeting. The same was true of the ECB who held European interest rates at 1%.

Economists said that the BoE was walking a tightrope between nervousness over rising inflation and growing concern about the impact of last month’s austerity budget on the struggling economy.
“The stickiness of UK inflation remains a concern but ‘lower for longer’ is likely to remain the theme when it comes to interest rates,” said Stephen Boyle, head of economics at Royal Bank of Scotland. Inflation is expected to climb even higher after the government ramped up VAT to 20% from 17.5%, set for introduction in January 2011.

It was because of this inflationary pressure that we saw dissent from policymaker Andrew Sentance at June’s MPC meeting. Expect to see more rumour and unrest within the MPC over the course of the year as pressure on inflation continues.

Sterling has rallied in the past month in the wake of a general election in May and the new coalition government’s budget announcement, this rally has however now started to wain due the possible impact of tax rises and spending cuts on the overall economy.

The trends displayed this past week demonstrate the worth of staying up to date in order to maximise your currency purchase potential. By contacting your account executive here at the Foremost Currency Group for a free consultation, we can help you to optimise that purchase. For example, buying €200,000 this past week on Friday instead of Monday, would have meant a loss of over £2400. We can help you to avoid losses by giving you relevant economic information and opinion on trends within the currency market.

For the week starting 12th July, we see a whole host of data releases in the UK; GDP figures on Monday and the claimant count on Wednesday holding the most potential for placing pressure on sterling. Whilst in Europe, the German economic sentiment survey on Tuesday and inflation figures on Wednesday hold the most gravity.

For more information on how upcoming data releases may affect your currency, see the below for a concise round-up of volatile market moves or call in for consultation with your Account Manager here at the Foremost Currency Group. We keep abreast of key announcements from prominent government figures both here and in Europe, helping us to help you maximise your Sterling/Euro currency potential.

USD
Last week saw another volatile week for the GBP/USD pairing, with a high on Thursday of 1.5225 and the low of 1.5090 that was hit on Monday, Wednesday and Friday respectively. Sterling edged up versus a broadly weaker dollar on Friday as the day progressed as signs of an improving global economic outlook supported higher-risk currencies.
Sterling hovered near a two-month high hit against the dollar on Thursday. It slipped to its lowest against the euro in 2-1/2 weeks as the single currency also benefited after Thursday's upbeat U.S. jobless claims data.
"Sterling has been benefiting from weakness in the dollar," said Adam Cole, global head of currency strategy at RBC, adding that investors' greater appetite for risk was putting selling pressure on the U.S. currency. A climb above 1.5224 hit on Thursday would mark the pound's strongest since early May.
In other Dollar related news, the U.S. pledged to monitor China’s “undervalued” yuan in the next three months for signs that Asia’s fastest-growing market is living up to its commitments to help rebalance the global economy.
China took a “significant step” last month when it ended its peg to the dollar and allowed markets to drive the currency higher. A report by the US Treasury department, initially due April 15, concluded that no major U.S. trading partner manipulated its currency and said it’s not yet clear whether China’s policy shift will correct the yuan’s undervaluation. The Treasury promised another review in October. You may think these developments may not directly effect the GBP/USD pairing, but are worth keeping tabs on as if we see a weakening dollar in any area, it is surely good news for those looking to purchase with Sterling.
This week, we don’t have a great deal of significant data releases of note from the USA, other than the release of the Fed Budget for June on Tuesday, which may effect the markets depending on its content, anticipation of which way this will swing is somewhat limited at present but it is broadly considered unlikely that we will see any major change. We will however be looking to see if the pound can sustain it's recent gains against the dollar, or whether we will see profit taking by investors, where they reverse their positions to tie up any gains they have made in the rise of the currency. We saw this happen in previous weeks for the GBP/EUR cross, and as a result, the pound lost nearly 2% in value against the single currency.
Looking at the broader picture, we are still sitting at almost a 6-month high against the Dollar, therefore locking in at these levels and capitalising on your own currency gains is certainly worth consideration if you have any upcoming requirements in the short to medium term future. By paying a deposit of up to 10%, you can fix your exchange rate at the current level for anything up to 2 years, giving you peace of mind about the fluctuating exchange rate.

FSA to ban fast-track and self-certified mortgages

2010-07-14T05:38:00.000-07:00

Mortgage borrowers will find it takes longer to process their application and the self-employed could struggle to get a loan if proposals announced today by the Financial Services Authority are implemented.
The regulator has published a consultation paper which proposes requiring verification of borrower's income in every case to prevent over-inflation of income and mortgage fraud.
If implemented, this will prevent the "fast tracking" of mortgage applications – the granting of loans without requiring proof of income – a wide-spread practice among mortgage lenders.
David Hollingworth of mortgage broker London & Country says it could mean that rather than a mortgage being granted instantly – as often happens now providing the lender can find enough information about the borrower's credit history electronically – it could take up to three weeks for the borrower to find out if he or she qualifies for a desired loan.
The proposed move also means that those who have recently become self-employed have no hope of applying for a "self-certified mortgage".
These loans were initially designed to enable self-employed borrowers who had less that three years' of accounts to borrow loans without providing bank statements or tax returns to support their claimed level of earnings.
But over the past few years, as people have begun to struggle with the amounts of borrowing they have taken on, it has become apparent that the loans have been used by many borrowers who wanted to take out bigger loans than a lender would normally allow them.
The FSA has also acted against several mortgage brokers who have fraudulently increased the amount of money applied for in mortgage applications.
The consultation proposes imposing affordability tests for all mortgages, making lenders ultimately responsible for assessing a consumer's ability to pay, and preventing the use of interest-only loans to enable borrowers to cope with a mortgage they could not otherwise afford.
Although the self-certification mortgage has disappeared from the market during the credit crunch, the proposals will prevent lenders from reintroducing itonce confidence returns.
Hollingworth says the proposals are sensible: "The proposals are quite measured, but they will set a framework so when the market goes into recovery, we have something that contains the lenders a little bit. The lay man will hopefully regard this as common sense."
However the Building Societies Association said there was a risk the proposals could create "mortgage prisoners". Paul Broadhead, head of mortgage policy at the BSA, said: "To ensure borrowers are not adversely affected, it will be important that when the rules are implemented they provide clarity for lenders and are enforced consistently across the market.
"Interest-only mortgages are not inherently bad or high risk. However, it is important that borrowers with interest-only mortgages understand the importance of having a plan in place to repay their mortgage at the end of its term. The FSA needs to proceed with caution so as not to restrict the use of interest-only as a way of helping borrowers overcome repayment difficulties."
The proposals were drawn up following detailed analysis of past lending decisions, looking at the causes of arrears and repossession since 2005.
The FSA found that:
• 46% of households either had no money left, or had a shortfall after mortgage payments and living costs were deducted from their income;
• Almost half of new mortgages between 2007 and the first quarter of 2010 were provided without a customer having to verify their income;
• The share of interest-only mortgages has been increasing. At the peak of the market, over 30% of all mortgages were interest-only;
• Many consumers with no repayment vehicle count on future house price rises or uncertain life events to repay their mortgage and some have no plan at all;
• Borrowers with a credit-impaired history are particularly vulnerable.
Lesley Titcomb, FSA director responsible for the mortgage market, said: "There is a clear link between financial overstretch and mortgage arrears and repossessions, and we are determined to protect vulnerable consumers by making sure that everyone who takes on a mortgage can afford to pay it back.
"While it is clear the mortgage market has worked well for many, we need to build a strong new framework to protect mortgage customers and to ensure that the problems we have seen in the past do not happen again, particularly as the mortgage market recovers."
The FSA also wants to provide extra protection for vulnerable customers with a credit-impaired history.
Today's report includes the key findings from the FSA's review into arrears charges, which indicated significant variation in the level of arrears fees across the market.
The mortgage rules require arrears charges to be based on a reasonable estimate of the cost of the additional administration caused by the customer's arrears.
The FSA has stepped back from an idea initially raised in the mortgage market review discussion paper last year to set a maximum loan-to-value ratio on mortgages. Such a move would have signed the death knell for mortgages worth 100% of the property's price.

Spanish House Price Data - "Bonkers"

2010-07-14T05:32:00.000-07:00

This article comes from our friends at Global Edge

Spanish overseas property portal, Kyero.com has published a new report which aims to provide a more accurate picture of the Spanish property market.The new report analyses the three most important sources of information, official data, data from valuation companies and property portal statistics.

Here are the highlights:

1. Property transaction figures are the most reliable and show a peak-to-trough decline of 56%. Transaction levels were lowest in the early part of 2009 and have since picked up, a little.

2. Official data from the Ministry of Housing (MVIV) publishes valuation data but not information about actual sale prices, even though it has the information. Publishing actual data would improve transparency in the market and lead to more property transactions says Kyero.com’s Martin Dell. It should stop pursuing a political agenda and behave more responsibly.

3. Official data shows a price drop of 11.2% over two years which is clearly ludicrousPortal data from likes of Idealista, Fotocasa, Facilisimo and Kyero record asking prices but as asking prices can differ significantly to the actual prices paid, they are not accurate and can appear to be “bonkers” says Dell. The most realistic figures are from Idealista.com, which show a peak-to-trough decline of 23.7%4. Valuation company data shows average declines of around 15%. This is not accurate either. It is worth noting that valuation companies are employed by banks, so have a vested interest in reporting higher prices.

It is difficult not to agree with Dell’s conclusion:“What the market needs is for the Spanish government to publish actual transaction prices of individual properties so that the 'hard facts' are available for further analysis. While this will not reveal the 'actual' price paid for the property in most cases - thanks to a cash element of many property transactions - it will level the playing field"."My own belief is that when property buyers are armed with better data, they make better buying decisions. When that data is lacking or incomplete, they either make sub-optimal decisions or they decide not to buy at all. This lack of data transparency, in my opinion, is a significant factor in the continued suppression of the Spanish property market”.

Eurozone Production Output grows for 3 months in a row

2010-07-14T03:28:00.000-07:00

Industrial production in the 16 countries that use the euro increased for the third consecutive month in May.
Eurostat, the EU's statistics office, said production climbed by 0.9% from the previous month, the same as the increase seen in April.
However, economists had forecast a rise of 1.2%.
Eurozone manufacturers have benefited from the lower value of the euro, as this makes their goods cheaper in countries outside the bloc.
This has helped manufacturers play a key role in dragging the EU out of recession.

UK Unemployment falls

2010-07-14T03:21:00.000-07:00

The number of people unemployed in the UK fell by 34,000 to 2.47m in the three months to May, official figures show.
Meanwhile, those claiming Jobseeker's Allowance fell in June by 20,800 to 1.46m, the Office for National Statistics (ONS) said.
That took the jobless rate to 7.8%, the lowest since January and below forecasts of about 7.9%.
The number of people in work rose by 160,000 in the three months to May, the biggest rise since August 2006.
However, the increase was due to a record 148,000 rise in the number of part-time workers, while full-time workers increased by just 12,000.
The ONS said the percentage of workers in part-time jobs was 27%, its highest since records began in 1992.
The figures will raise hopes that the economic recovery is gaining momentum. Although some experts think unemployment could start rising again by the end of next year. 'Stable' market
Andrew Sentance, a member of the Bank of England's Monetary Policy Committee, said in a speech on Tuesday that the labour market had stabilised.
"Evidence from the Bank of England's agents and recent employment surveys is that the labour market in the UK has stabilised and that labour demand in the private sector may have already started to pick up."
David Tinsley, an economist at National Australia Bank in London and a former Bank of England official, agreed that rising unemployment had come to an end - for now.
"It may pick up again next year. It's hard to see how a steady pace of improvement will be maintained as public-sector job losses start to bite."
Vicky Redwood, of Capital Economics, was also cautious about future downward trends. "We still doubt that private sector hiring will pick up strongly enough to offset the severe public sector job cuts," she said.
The UK jobless rate compares with 10% in the eurozone, 9.5% in the US and 5.2% in Japan, the ONS report showed.Pay rises slow
Meanwhile, the ONS reported that wage growth eased sharply in the three months to May, with average weekly earnings growth falling to 2.7% from 4.1% in the three months to April.
Stephanie Flanders, the BBC's economics editor, said: "The bottom line is that UK households are still seeing a significant squeeze in living standards as a result of the financial crisis, even if more people than expected have found paying work.
"And, lest we forget, the squeeze from higher taxes and lower public spending has barely begun," she said.

US mortgage madness - is it happening again ?

2010-07-08T07:20:00.000-07:00

Last night I caught up with 3 of my old mates from University, one of who has been living in Denver for the past year.

We touched on the credit crunch and generally set the World to rights, and he told a story that should cause reverberations around a World that is struggling to recover as it is......

He has some friends in Denver, and the husband is concerned about his job at the moment, and the potential effect that being out of work could have on their ability to pay their mortgage etc.

Their house has a bit of equity, so they have decided to put it on the market, and either downsize, or rent, which would allow them a bit of cash to use as a buffer.

So, they went to their bank to let them know what they were planning to do

"Why do you want to do that ?" Says the bank

"Because we may have problems paying the loan", say the couple

So the bank says (and I paraphrase) -

"Why don't you stay in the house, we will refinance onto a better rate, and go up to 125% ..."

Taken aback, our couple say "But we don't need more money, and we will still have problems paying"

"No problem" say the bank. "we will extend your term to 30 years hence reducing the monthly payments"

Shocking eh?

This is exactly the type of irresponsible lending that got us in the huge pile of shit that we are still trying to get out of. Be afraid, it could be happening again.............

ECB leave interest rates unchanged again

2010-07-08T06:59:00.000-07:00

The European Central Bank left its benchmark interest rate unchanged at a record low of 1 percent for the 14th consecutive month on Thursday amid lingering concerns over the health of the continent's banking sector.
The ECB's governing council had been widely expected to leave its refinancing rate where it has been since May 2009. Economic growth in the 16-nation eurozone remains modest and inflation tame - fueling expectations the central bank will stay put for months to come.
After economic activity strengthened during the spring, eurozone gross domestic product is expected to keep growing at "a moderate and still uneven pace" ECB President Jean-Claude Trichet said in his opening statement to a post-decision news conference. Inflation rates should remain moderate next year, he added.
With rates on hold, Trichet was facing questions on banks' demand for cash and the upcoming publication of "stress tests" on European banks.
Market fears focus on concerns that banks are holding government bonds and other debt from financially troubled countries such as Greece, Portugal and Spain - and could be dragged into Europe's simmering government debt crisis.
To dispel such fears, European Union leaders have pledged to disclose the results of the "stress tests" designed to show how banks would do if circumstances worsen. Trichet welcomed that decision.
Results are to be published July 23. French Finance Minister Christine Lagarde has said they will show European banks are "solid and healthy."
The tests will cover 91 banks in Europe, which represent 65 percent of the European banking sector.
On Wednesday, the committee subjecting the banks to stress tests said it has widened the factors aimed at determining their financial health. That reinforced confidence in the results.
Last week brought signs of relief on another front as a record batch of unusual 12-month loans to banks expired smoothly. As the euro442 billion ($557 billion) in credit came due, the ECB said it would lend a lower-than-expected euro131.9 billion to banks for the next three months.
That suggested banks' cash needs are easing despite lingering worries about the impact of the eurozone debt crisis.
The outcome has helped lift the euro after a prolonged battering. The currency, which hit a four-year low below $1.19 on June 7, traded above $1.26 on Thursday.
Separately, the Bank of England left its base interest rate at a record low of 0.5 percent for the 17th straight month and left its asset purchasing program on hold. Britain's economic recovery remains fragile and public spending cuts are expected to hamper future growth.

Spanish Caja's - ticking time bombs

2010-07-06T14:33:00.000-07:00

Even with Spain’s Cajas, or savings banks, completing the country’s most aggressive sector restructuring in history, after nearly 90%, or 39 out of 45 merged or participated in some form of “cold fusion” and benefiting from the financial assistance of the Spanish central bank, there has been precious little written about the actual holdings of this most aggressive lender of mortgage to Spain’s 20% unemployed population.
Until today: a new report by CreditSights’ David Watts indicates that investor worries about the Spanish banking system are very well founded and likely underestimate just how bad the true situation actually is. In “Spanish RMBS: Insider Caja Loan Books”, Watts concludes that the Cajas are likely hiding losses on home loans by takingnon-performing mortgages out of securitized pools. Absent this unsymmetrical onboarding of risk, the overall deterioration of the broader pool would have become ineligible as collateral in ECB refi operations. In essence, Watts says, “by buying the loans out of the mortgage pool, the cajas would be taking those weaker loans onto their own books.” This implies that the 3.7% serious delinquency rate reported by the cajas is in reality far higher, and likely “underestimates their potential losses.” And what’s worst: as ever more delinquencies mount courtesy of austerity, and the Cajas run out of cash to constantly buy up the weakest performing loans, all of Spain is about to lose ECB collateral access to its hundreds of billions in securitized RMBS, completely locking the country out of any access to liquidity, even that of the ultimate backstop, the European Central Bank.
Spain’s cajas are notoriously secretive about the state of their loan books. Which is why CreditSights took a bottoms-up approach, looking at a sample of 143 Spanish residential mortgage-backedsecurities collateralized by 136 billion euros ($170 billion) of loans,of which 45% was originated by cajas.
In an attempt to better understand the stresses that Spanish mortgages are under, we use Spanish RMBS investor reports to assess loan performance and compare how Caja-originated loans compare to those extended by the larger, more-diversified Spanish commercial banks such as BBVA and Santander. The performance of mortgages within caja-securitisations is noticeably weaker than for Spain’s commercial banks.
As CreditSights points out, the outstanding balance of securitized Spanish resi mortgages is estimated to have reached €168 billion, representing 15.3% of all mortgage lending in the country. Yet taking advantage of ECB generosity to take on all sorts of worthless assets on the left side of the ledger supporting the euro, “even with investors globally taking a much more sceptical approach to RMBS following the US subprime crisis, issuance of RMBS in the Spanish market has remained relatively strong as issuers have retained deals primarily to use as collateral against ECB open-market operations.” In essence, the ker structural difference between the US and Europe can be summarized in the previous sentence: while US banks were at least smart enough to know they need to offboard RMBS associated risk to even dumber investors, in Europe, it was the ECB which for many years running was the backstop, thus preventing the need for prudent risk management. The end result: the collapse of the Spanish deposit savings system.
The chart below shows the dramatic surge in RMBS retention at about the time the subprime market in the US blew up. The primary “beneficiary” of this stupidity – the cajas.

As to the reason why the cajas are avoided like the plague by virtually everyone, the chart below says it all: while everyone was enjoying the credit fuelled binge on the way up (very much as the US was), the reversion has yet to catch up with reality. The truth is that even as the quarterly change in lending has plunged, the property price index is massively higher than where it should be currently. Once the benefits of record low Euribor and other artificial props finally expire, look for Spanish real estate prices to literally plummet destroying not just the local banking system, but that of the entire interlinked European financial system.

And a quick detour into Spanish CMBS. Watts explains: “As a percentage of GDP, Spanish household sector has debts of 85% and housing-related debts equivalent to around 65% of GDP. Indeed, including loans for residential development (commercial real estate lending), total housing-sector related lending is equivalent to 104% of GDP, nearly double where it was in 2003. That means that we estimate that Spanish property developers have debt equivalent to almost 30% of GDP.” This is simply another massive risk overhang that the banks never offloaded, and has so far flown very successfully beneath the radar. Yet unlike RMBS, the ECB does not accept CMBS as collateral against refi ops, leading one to scratch their head why the banks were so stupid in this particular case.
CreditSights has this last warning to add on Spanish development loans:
Given the US experience with development loans and the fact that much of this developer-related lending was no doubt focused on the worst affected markets – retirement and vacation properties – we think these loans are probably performing more poorly than the ordinary residential mortgage lending that we track within our RMBS sample. As a result, our sample may understate the true scale of problem loans within the Spanish banking sector.
Worried yet?
As to the actual results of CreditSights broader analysis of , the chart below summarizes that as the deterioration in Spanish unemployment accelerated, delinquencies remained somewhat flat, primarily courtesy of a collapsing Euribor rate. As we have pointed out recently, now that the LTRO has matured, Euribor and Libor have only one way to go: up.

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So back to the split between caja-originated mortgage versus those issued by the large banks, Watts confirms that there is a material underperformance when it comes to Cajas: “the most obvious takeaway is that mortgages originated by cajas have been running at higher delinquency levels than mortgages originated by Spain’s commercial banks for at least the part four years.” The chart below demonstrates just how much worse the Cajas books’ are, even based on doctored public data, than banks:

The key question posed by Watts, and whose answer is truly troubling, is the following: what is driving the volatility in the caja’s mortgage performance. The explanation offered: “we believe this phenomenon might be partially explained by the removal of delinquent mortgages from Spanish RMBS pools by the originating bank during the first and second quarters of 2009. Mortgage repayments exhibited a dramatic rise during this period. The average repayment rate on securitised caja-mortgages rose by 360 bps from 6.7% in the fourth quarter of 2008 to 10.3% in the first quarter of 2009.”
And the punchline that should shut up “all is well in Spain” apologists once and for all:
We understand that both cajas and Spanish banks have been supporting their RMBS by buying some delinquent mortgages out of the pool. Buying mortgages out of the pool will reduce delinquency rates and will also boost repayment rates – to the RMBS, the loan is considered to have been refinanced by the caja. Issuers are not obliged to provide such support to their RMBS transactions but the rise in delinquencies may have threatened ratings on retained deals, meaning that they would have become ineligible as collateral in ECB refinancing operations. By buying the loans out of the mortgage pool, the cajas would be taking those weaker loans onto their own books. That means that the current 3.7% serious delinquency rate (the orange line on the right-hand chart above) may flatter the performance of the cajas’ mortgage books and underestimate their potential losses.
CreditSights concludes with a somewhat much somber bigger picture analysis:
A further decline in interest rates has for the moment allowed the aggressive levels of leverage not to implode, despite falling Spanish wages and rising unemployment. Indeed, Spanish mortgages are performing only slightly worse than UK prime loans and are performing considerably better than UK-performing loans.
But behind those ostensibly reassuring numbers lurk weaker performance in caja loan books and the prospect of substantially weaker performance on non-mortgage lending (i.e., loans to property developers). What’s more, if Spanish government austerity packages have knock-on effects for Spanish household incomes, most obviously as a result of reductions in public-sector wages, then this level of mortgage indebtedness will become less sustainable and would no doubt precipitate further rises in delinquencies.
And the most dire side-effect of an avalanche of increasing delinquencies, and the resultant inability of the cajas to mask the deterioration by buying back all the worst-performing loans, would be the loss of ECB access. In the meantime, the cajas would get destroyed as they already are the proud owners of the very worst loans available: “Any mortgages that cajas have been purchasing out of their RMBS loan pools could have been artificially reducing the level of bad loans in RMBS while simultaneously undermining the quality of cajas own assets”

Latest currency update : Good news for Spanish Mortgages

2010-07-06T02:00:00.000-07:00

The latest market report from our friends ar Foremost Currency Group

EUR
Last week we saw the Euro reach a high of 1.2456 for the first time in more than 18 months. This as investors shunned the single currency on funding concerns in the euro zone ahead of bank repayments to the European Central Bank as well as more debt auctions. The pound extended gains after Bank of England policymaker Andrew Sentance stated that drastic tax hikes and spending cuts outlined in the new coalition government's budget last week would not remove the need to start raising interest rates. As we have often seen in the past with sterling strength often comes some retraction. This as funding concerns in the euro zone eased with Spain's auction of 3.5 billion of five-year bonds having seen a lower bid-to-cover ratio but yields were only a touch higher than those at an auction in early May, easing concerns after a downbeat signal on ratings from Moody's the previous day.
With the current volatility in the market placing Stop loss and Limit orders on a rate may prove be useful. When markets are volatile, placing an upper and lower limit allows you to still aim for a higher rate should markets move in your favour, while protecting you from loss should the markets move against you. These contracts are suitable whether you are buying or selling foreign currency. Contact us today to discuss these types of contract further

Looking forward to the week ahead the most important news coming from the UK may be the MPC (monetary policy committee) Rate Statement and the official bank rate both of which are set to be released on Thursday 8th July. The rate statement measures the Interest rate at which banks lend balances held at the BOE to other banks. With Short term interest rates being the paramount factor in currency valuation this tends to be significant. The official bank rate most importantly discusses the economic outlook and offers clues on the outcome of future votes and is released with Official Bank Rate. Although only issued if the bank rate changes it is among the primary tools the MPC uses to communicate with investors about monetary policy.

In Europe the most crucial news could be the minimum bid rate and the ECB press conference. The minimum bid rate is the Interest rate on the main refinancing operations that provide the bulk of liquidity to the banking system and is usually delivered about 45 minutes before the ECB press conference. The ECB interest rate statement like the UK official bank rate is the primary method that the ECB uses to communicate with investors regarding monetary policy. It covers in detail the factors that affected the most recent interest rate and other policy decisions, such as the overall economic outlook and inflation. Most importantly, it provides clues regarding future monetary policy. With all this in mind it could prove to be a crucial week for the sterling/single currency pairing.

With the statements on the interest rate in both the UK and Europe and the growing financial crisis in the Euro zone this week is likely to be another volatile one. See the relevant data releases below for a concise round up of volatile market movers; however it is well worth taking the time for a consultation with an account manager here at Foremost Currency group.

USD
Last week saw Sterling continue to make ground against the dollar, opening the week at 1.5043, reaching highs in excess of 1.52 in Friday trading. The main highlight of last week was the monthly non-farm payrolls release on Friday, which showed that unemployment was lower in the US than both the forecast, and last month’s reading. You can see below the improvement in the GBP/USD rate over the past month, from a low near 1.44 up to the current 1.52 at Interbank levels.

One factor behind the weakening of the Dollar this week has been the renewed pressure from the American government for China to un-peg its currency from the US Dollar. China had previously announced they would make moves to gradually allow their own currency to float freely. This weakened the US dollar, as it is seen as likely that the Chinese and other governments would in future reduce their US Dollar reserves, and invest in the Chinese currency the Yuan.
This week, we don’t have any significant data releases of note from the USA, so we will be looking to see if the pound can sustain it's recent gains against the dollar, or whether we will see profit taking by investors, where they reverse their positions to tie up any gains they have made in the rise of the currency. We saw this happen last week for the GBP/EUR cross, and as a result, the pound lost nearly 2% in value against the single currency.
Looking at the broader picture, we are now at almost a 6-month high against the Dollar, therefore locking in at these levels and capitalising on your own currency gains is certainly worth consideration if you have any upcoming requirements in the short to medium term future. By paying a deposit of up to 10%, you can fix your exchange rate at the current level for anything up to 2 years, giving you peace of mind about the fluctuating exchange rate.

For more details, and a free consultation to outline your options, contact us today on 01442 892 060.

This Weeks Data

The main event for the week is the interest rate decisions for the EU and UK on Thursday. While rates will be left on hold, any comments that indicate future interest rate movements can have a nig impact on exchange rates. Contact us today for a free consultation on how economic data can impact on the cost of your currency purchase.

Monday
US Holiday for Independence Day. For the EU we have Retail Sales for Germany and the EU as a whole, in addition to some confidence measures. IN the UK we have a measure of inflation. If it’s higher than expected then Sterling may gain.

Tuesday
A quieter day for data releases. There is an interest rate decision in Australia, although we expect rates to say on hold this month. In the USA there is some manufacturing data which reflects business conditions in the states.
Wednesday
Gross Domestic Product data is released from the EU today. GDP is considered as a broad measure of the Eurozone economic activity and health. A rising figure could strengthen the Euro and bring GBP/EUR rates down, and vice versa.

Thursday
The busiest day of the week for data. We have an interest rate decision for both the EU and UK. Rates will probably be left on hold, but the comments that accompany the decision can affect exchange rates. Also in the UK, we have a GDP estimate, Industrial and Manufacturing production. These are significant releases and may well affect the value of Sterling. In the USA Jobless measures will be watched closely.

Friday
Inflation data from the UK in the form of the Producer Price Index, which is a monthly measurement of the rate of inflation experienced by the UK manufactures when buying goods and services. A high reading can boost Sterling but a lower reading may cause rates to drop. Consumer prices from Germany is the main data from the Eurozone.

House in Spain for sale, with land and stables

2010-07-05T13:51:00.000-07:00

We are pleased to be able to offer this Equestrian property with an OCA licence for 5 horses and a totally flat 5,000m2 plot situated in the countryside with fabulous routes for riding.

Approached via a good dirt track with an electronic entrance gate, there are 5 post and rail paddocks with electric fencing for added security.

There are 2 stables with tack and feed room plus a large store room. There is a 2 - 3bedroom house and a walled and gated swimming pool.

The house comprises entrance hall, open plan living room with fireplace, kitchen with granite work tops, dining area, sliding glass doors to 42m2 day room/bedroom 3 with sliding glass windows to garden. Arch from living room to bathroom, bedroom 2 with fitted wardrobes and bedroom 1. There windows have rejas and persiana blinds. The property has internet, mains electricity and its own well.

Situated near the popular town of Coin, this property is conveniently situated for access to the coast at Marbella, and airport at Malaga.

This property is available for just €395,000. For further information, additional photos, or to arrange a viewing, please email chris@europamortgages.com

Spanish banks merging and restructuring

2010-07-01T01:39:00.000-07:00

SPAIN will pump nearly $16 billion into problem savings banks amid intensified EU efforts to ease global fears for its banking systems.

In what could be a key step toward cleaning up a sector reeling from the collapse of a decade-long housing boom, Spain's central bank outlined details overnight behind a state-financed bank rescue fund that it said will support a “historic” consolidation of the country's savings banks.

This is, as I have said many times, long overdue, as it was clear to anyone on the Costa's, that there were far too many branches of far too many banks, all competing for the same business.

The Bank of Spain said it authorised injecting €11 billion ($15.8bn) in public funds to aid in the restructuring and bolster the balance sheets of the merged banks.At the same time, the European Union said it would triple the number of banks subject to public stress tests to allay a growing global anxiety over the bloc’s finance sectors.
The announcements came amid building market pressures on European banks. Bank shares have been sliding since April because of concerns that banks' holdings of sovereign debt may not be repaid in full and that government austerity will stifle economic growth and hurt private-sector borrowers.
banks, in particular, have been hard hit by concerns over how their European counterparts will fare after the European Central Bank this Thursday halts a special loan facility for euro-zone lenders.Overnight, shares of the two biggest banks, Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA, fell 6.8 per cent and 7.2 per cent, respectively, while those of smaller lenders also dropped sharply.The Bank of Spain also said that 39 of 45 savings banks, or cajas, are involved in mergers. The largest will combine seven institutions to create Spain's third-largest bank by financial assets after Banco Santander and BBVA.

Hopefully the mergers will also allow for some new lending poilicies and practices. Some kind of reform in the way Spanish mortgages work is also well overdue.

The central bank said its deployment of the €11bn in state funds would leave the Spanish financial system in “a solid and solvent position”.Meanwhile, European officials said the number of banks that would be subject to a European Union stress-test exercise will expand from the 22 big banks that were examined last year to include a further 60 to 120 banks.The tests will for the first time incorporate banks such as German Landesbanken, which aren't among the region's largest but whose possibly weak financial condition has created uncertainty in financial markets. The wider net means major banks from many EU countries that weren't included in last year's stress-test exercise, such as Ireland, will now be incorporated.The tests, designed to see whether banks have enough financial strength to deal with serious economic shocks, will also for the first time examine whether they can withstand the effects of a sovereign-debt default in the euro zone.Officials didn't identify what defaults would be contemplated. The question is sensitive because European governments have repeatedly insisted default by a euro-zone government is impossible.The tests, which are administered by national regulators, should be completed by the middle of July, officials said. A report with bank-by-bank results and details on the test's parameters will be published in the second half of July, they said.Last year's EU-wide stress tests covered a smaller swath of banks and only aggregate outcomes were disclosed. Unlike last year's US bank stress tests - which were credited with helping shake off worries over banks that had gripped financial markets - the European exercise wasn't used to mandate that banks raise new capital.This year, European governments say they are preparing plans to ensure that banks whose capital cushions fall short receive new capital. In Germany, for example, the government has vowed a vigorous examination of its banks and has signalled it stands ready to provide more capital if it is needed.“Given the current uncertainty in financial markets, more transparency can restore trust,” German Chancellor Angela Merkel said in an interview with The Wall Street Journal last week. “But building trust will only work if every country also shows how it will handle the results, for example by recapitalising its banks if necessary.”The decision to publish the EU stress-test results was made by European leaders at a June 17 summit, but they didn't agree on which banks should be included and what information would be publicly released.The resolution to include more banks was made last Friday at a meeting in Brussels that included officials from the ECB, the European Commission, the Committee of European Banking Supervisors and representatives of EU governments.Chantal Hughes, spokeswoman for EU internal markets commissioner Michel Barnier, said Mr Barnier had backed what she suggested were broader, tougher and more transparent stress tests, believing them to be “more rigorous and credible”.German banks are Europe's most exposed to bad loans, according to a study published this week by PricewaterhouseCoopers. About €213bn in non-performing loans was sitting on the balance sheets of Germany's banks in 2009, a 50 per cent increase over 2008, according to the study. German banks are among the largest holders of both commercial and private-sector loans issued in vulnerable countries such as Greece and Spain. Some are also exposed to the US and Eastern Europe.Spain's central bank, aiming to settle market disquiet about its banking system, forced the hand of other European authorities when it pledged this month to publish the results of stress tests on all its banks.Nonetheless, even with the Bank of Spain announcement, there is still considerable work to be done for the country's banks. Lenders need to cut some 50,000 jobs and close as many as 9000 branch offices to cut costs and adapt to an environment of much weaker demand for credit, according to an estimate by US consultancy McKinsey & Co.Two cajas have been subject to intervention since the beginning of the downturn: Caja Castilla-La Mancha and Cajasur. The first drained Spain's deposit-insurance fund of €3.78bn, while the state-financed bailout fund is providing €800 million to cover losses at Cajasur.Spain had already set aside €12bn in the bailout fund, and it can be leveraged up to a maximum of €99bn if needed.S&P credit analyst Jesus Martinez said the final sum drawn from the fund will depend on how the macroeconomic situation in Spain evolves, and how the individual merger processes evolve. “If problems aren't solved, more (than the €11bn) will be needed,” he said.In a related development, loan losses from the real-estate sector continue to pile up.S&P recently warned of a potential new wave of insolvencies among real-estate developers, leading to higher credit losses on lending to the sector.The latest big casualty, Sacresa SA, filed for protection from creditors in a Barcelona court on Monday, defaulting on €1.8bn in debt.

Spanish prices under pressure until 2012 says Fitch

2010-06-30T06:14:00.000-07:00

The Spanish property market correction will run into 2012, with prices down by 30% in total, say ratings agents Fitch.

Spanish property prices haven’t fallen enough, according to a new report from Fitch Ratings.
“Fitch believes that Spanish house prices remain over-valued relative to income thresholds and need to decline further to improve affordability dynamics,” says Rui Pereira, Managing Director and Head of Fitch’s Spanish Structure Finance in Madrid. “The supply overhang of unsold homes, more pro-active sales strategies by financial institutions, and reduced credit availability are also expected to weigh on Spanish home prices over the near-term.”
Fitch question official figures showing that prices have fallen just 11.2% since Q1 2008, pointing to a drop in transactions of 48% between 2006 and 2009. Sales that do go through happen at prices well below the government index, argue Fitch.
Fitch use affordability measures, house price long term equilibrium, and the imbalances of demand and supply to judge the current price of property in Spain.
At the height of the boom, the affordability ratio peaked at 7.7 years (cost of property/gross household income), up from 3.9 years in the years 1995-2000. For sustainable affordability ratios of around 5 years, prices need to fall by 30% from peak.
Fitch expect prices of holiday homes on the coast to fall the most, i.e. more than the 30% average.

Spain bank stress

2010-06-30T06:09:00.000-07:00

Spain is demanding the ‘immediate publication’ of the stress tests on EU banks. Minister for Tax and the Economy, Elena Salgado, said that the publication would verify the solvency of the Spanish banking system.The call comes with the markets under pressure as many EU banks are due to repay loans to the European Central Bank this week, a situation which has send many markets, including Madrid, sharply south.Today the markets have taken a breath as in the event the banks requested less money than expected from the ECB. The IBEX 35 is among those to have rallied early today in response, but it fall back later.The Bank of Spain has approved help of 8.035 billion € for the caja savings bank in Spain. Most of the funding will go to the so called ‘cold fusion’ between Caja Madrid and Bancaja which will get 4.465 billion.Meanwhile the Chairman of the BBVA bank, Francisco González, has said that Spain and Europe will exit recession strengthened. However he also warned of the need for the Government to take ‘more measures’ and be ‘more rigorous’.Deputy Prime Minister, María Teresa Fernández de la Vega, said on Wednesday that the government would not be withdrawing the 420 € extra payment made to the unemployed whose standard payments have been used up. Minister for Employment, Celestino Corbacho, had said the subject was under debate in cabinet earlier, but de la Vega said social protection would be maintained.Non-financial companies earned on average 4.8% more than a year ago in the second quarter of the year, according to the Bank of Spain. It comes after a fall last year of 27.9% although the bank notes those businesses are continuing to reduce employment and investment levels.The Portuguese Government is to use its ‘golden share’ to stop the sale of the Vivo telecoms company, which is in the target sights of Telefónica. The sale to Telefónica had obtained support from 74% of the shareholders in Portugal Telecom, but will not now go ahead, even at the offered price of 7.15 billion. Telefónica is really targeting the market in Brazil where Vivo has more than 53 million clients.The so-called TV wars for football coverage in Spain have taken a new turn today with the payment by the Prisa group of 90 million € to Mediapro for those rights. Sogecable, owned by Prisa, has made the payment to the courts in Barcelona as the down payment for the football Primera and Second division TV rights for next season.As VAT rates go up on Thursday with the introduction of the new 8% and 18% rates, gas users also face a 6.5% increase from the same day. A deal has been done not to increase electricity also, but 3.2 million gas consumers who are on the TUR last resource tariff will be paying more.Butane gas is also on the rise, with the normal butane bottle costing 4.7% more from Thursday. This is in addition to earlier increases this year which means a 14.4% increase so far this year.The Euribor rate, used to set most of the mortgages in Spain has ended June at 1.28% after the third consecutive month to see an increase. It’s the highest rate since August 2009, although mortgages which see their annual revision this month will still see a reduction.The European Commission has fined six Spanish steelworks for price fixing. The charge affects 17 groups in total worldwide, and more than half the fine falls on ArcelorMittal.A court in Granada has ordered the Spanish Airports Authority AENA, respect previous wage conditions for air traffic controllers in Granada Airport. AENA was found guilty of not correctly informing workers, with 45 days notice of their changes. However the ruling is open to appeal and AENA has already got in touch with the Andalucian High Court of Justice.Unemployment among university graduates has doubled since the start of the recession in Spain. It had reached 9.4% in 2009 where the EU average is 4.8%.Read more: http://www.typicallyspanish.com/news/publish/article_26573.shtml#ixzz0sLEdSyoC

The Winker's farewell

2010-06-30T02:14:00.000-07:00

I don't normally like to gloat, and it doesn't make up for England's pathetic exit from the World Cup, but the sight of Cristiano Ronaldo not performing and suffering an ignominous exit warms the cockles of my heart.
In the end Portugal tried to contain Spain by playing loads of men behind the ball, whilst Spain probed for the opening which eventually came to David Villa.
Ronaldo was also caught rather charmingly spitting towards the cameraman as he walked from the pitch at the end of the game. What a nasty little piece of work he is.......

UK mortgage lending still subdued

2010-06-30T02:13:00.000-07:00

The forthcoming Budget will keep the property market subdued, lenders say
UK mortgage lending remains subdued, according to the Council of Mortgage Lenders (CML).
Its comments came as it said the amount lent in new home loans rose by 7% in May from the previous month to £11.3bn.
Although that was up 10% from a year ago, the level of new lending this year has been low by historical standards.
The CML said higher taxes and public spending cuts to be announced in next week's Budget would probably subdue mortgage lending further.
"The market will inevitably be affected by how policy impacts on the wider economy - particularly on household finances and confidence," said the CML's economist Paul Samter. First-time buyers
In the latest edition of its monthly publication "Trends in Lending", the Bank of England said that lenders expected mortgage borrowing to remain "broadly flat" in the next few months.
"Contacts of the Bank's network of agents reported that demand for housing, especially among first-time buyers, continued to be constrained by tight credit conditions," it said.
"There has been an increase in the number of advertised products, including for loan to value (LTV) ratios of over 75%, which are often used by first-time buyers.
"However, the median LTV ratio on new loans to first-time buyers has changed little over the past six months," the Bank pointed out.
Despite the throttling of new lending due to the continued credit squeeze being experienced by banks and building societies, house prices have risen this year, according to most surveys.
The government's own survey, compiled by the Department for Communities & Local Government (DCLG), suggested this week that prices had risen by 10% in the past year.
The explanation put forward by most analysts is that prices have been pushed higher by a shortage of homes being put up for sale.

Latest currency update

2010-06-29T02:28:00.000-07:00

From our partners at Foremost Currency Group :-

EUR

Last week we saw the Euro reach a high of 1.2210, this as expectations of the UK budget would get Britain back on a sound fiscal footing offering more incentive for investors to cover extreme short positions in the UK currency, thus driving Sterling to its strongest level against the single currency in more than 18 months. The Budget announcement by Chancellor of the Exchequer George Osborne on Tuesday 22 June showed the new UK coalition government is serious about tackling its budget deficit, with tough spending cuts looming we could see Sterling supported in the mid-term. The other important news this week was the rating agency Moody's statement on Wednesday that it would see Britain keep its triple-A rating if the government successfully implemented the tightest budget in a generation. This is seen as boosting the appeal of UK assets among overseas investors and helping the Pound, this as the Euro came under broad selling pressure after the cost of protecting Greek government debt against default rose further, emphasising the revival of Sterling more as a result of Euro weakness rather than Sterling strength.

With the growing volatility in the markets the use of a forward contract can benefit you in eliminating risk and safeguarding your funds. The forward option takes time, interest rate differential and volatility in the market into consideration giving you the option of buying live to the markets on the day by paying a small deposit upfront, with a settlement period for the balance of up to 2 years.

Looking to the week ahead the most crucial news may the House price index (HPI) and Gross domestic product (GDP) announcements in the UK on Wednesday 30 June. The House price index (HPI) delivered by Nationwide bank gives us the change in the selling price of homes with mortgages. The HPI is the UK's second earliest report on housing inflation and the impact tends to be significant, as it is a leading indicator of the housing industry's health and because rising house prices attract investors and spur industry activity, however it varies from month to month. The GDP being the broadest measure of economic activity and the primary gauge of the economy's health as it measures change in the inflation-adjusted value of all goods and services produced by the economy; it may prove to be crucial to the GBP/EUR currency pairing.

With the news on the GDP and HPI in the UK and the growing financial crisis in the Eurozone this week is likely to be another volatile one for the GBP/ EUR currency pairing. See the relevant data releases below for a concise round up of volatile market movers; however it is well worth taking the time for a consultation with an account manager here at Foremost Currency group.

USD
Sterling appreciated against the USD last week following Chancellor of the Exchequer George Osborne’s delivery of a tough but balanced budget and although the measures outlined would mean higher taxes and spending cuts investors reacted favourably towards Sterling.
In the emergency budget Osborne revised down growth forecasts for 2010 and warned that unemployment would reach 8.1%. Strength for Sterling came from the tax policy and despite the VAT increase to 20% in January 2011, tax relief measures on corporate taxation and the fact that the VAT increase would not impact fuel costs were both seen as very positive measures to support economic recovery and stimulate industry in the UK. Further support came from the Fitch rating agency who called the UK budget a ‘strong statement of intent’, rating agencies in the past have heavily criticised the UK debt levels and the positive statement encouraged investor confidence. Moody’s rating agency followed suit the following day and provided additional market confidence after it released a statement saying they felt the UK budget was broadly in line with expectations and addressed all the major concerns on economic growth.
The only other positive remaining event for Sterling last week was the Bank of England minutes that revealed a surprise 7-1 voted on interest rates. MPC member Andrew Sentance voted for a rate hike. Sentance also went on the say that he felt despite current uncertainties it was appropriate to begin to gradually withdraw some of the exceptional monetary stimulus. The minutes boosted Sterling across the board as traders priced in the possibility of future rate hikes and investor risk appetite increased.
Economic data from the US created some safe haven buying of the Dollar as investors questioned whether the European debt crisis had some impact in slowing the US recovery. US Q1 GDP dipped slightly lower than expected but was offset by a strong increase in consumer spending and sentiment, the Federal Reserve Bank kept interest rates unchanged at 0.25% and made no changes to inflation or growth forecasts. Speculation regarding the G20 and mixed economic data was clear as a change in sentiment could be seen in GBP/USD levels as the Dollar closed the week trading near its weekly lows.
In the coming week markets will open to the G20 meeting, although the likelihood of a definitive statement addressing the European debt crisis is unlikely, a lack of unity could unsettle the markets and allow for safe haven buying into the Dollar. With Market confidence restored after last week’s budget announcement and the commitment from the UK government to take aggressive measures to reduce Britain’s deficit, Analysts are now concerned that the lower spending power could have a negative impact on growth and as such could cause further volatility for Sterling. Former BoE member David Blanchflower recently warned of the possibility for a double-dip recession in the UK and this could add to market jitters ahead of the GDP release. For an in depth view into what may affect your currency requirements please see our market data section below and/or contact your FCG account manager for a personal consultation.
This Weeks Data

The weekends G20 meeting will likely have an impact this week, as the EU debt crisis was the focus of discussions over the weekend. Last week we hit a 19 month high against the Euro and a 6 week high against the US Dollar. Any announcements could cause volatility in rates. If a clear plan is agreed to assist the EU that appeases the markets, the currency could strengthen and GBP/EUR rates could fall back away. If however no clear plan is agreed, and investors remain wary of investing in the Eurozone, we could see the Euro continue to remain weak and good buying levels remain.

The main fundamental data for the week is as follows:

Monday
Inflation data from Germany the main news today, which is an indicator to measure inflation and changes in purchasing trends. A high reading may cause GBP/EUR rates to fall. Elsewhere we have house Price data for the UK that gives an idea how the overall economy is faring. In the USA we have core personal consumption which again is an inflation indicator.

Tuesday
Today is all about confidence, and the focus is on the EU. We have consumer confidence, industrial confidence, Economic confidence and services confidence. If the measures show they are confident then the Euro may gain. There’s not much to be confident about in the EU at the moment, but developments from the G20 meeting may change this. Later in the day we have UK consumer confidence.

Wednesday
More significant data today – from the UK we have Gross Domestic Product. GDP is considered as a broad measure of the UK economic activity and health. Generally speaking, a rising trend has a positive effect on the GBP, while a falling trend is seen as negative. Unemployment measures from Germany and the US today should also be taken into account.
Thursday
Inflation data is the only UK release of note. With the BoE minutes last week showing a vote for higher rates, a high inflation reading could cause the Pound to rally slightly. Building permits from Australia and commodity prices from New Zealand may affect the antipodean currencies today. In the US, various jobless measures may affect GBP/USD rates.
Friday
Producer Prices from the EU will give an indication of future interest rate movements in the UK. There are also unemployment measures for the EU that may affect GBP/EUR rates. The most important release is the non Farm Payrolls from the USA. As these are so hard to predict, the figure often is significantly different than forecast and so can cause big swings in GBPUSD rates. If you need to buy or sell Dollars, speak to us before this release to ensure you are protected.

For more information on the information contained in this report, contact us today:

Tel: 01442 892060
Web: www.foremostcurrencygroup.co.uk

£5 cash machines introduced

2010-06-28T09:23:00.000-07:00

So there are a number of £5-only cash machines that have been introduced, in order to get more of the notes into circulation. Retailers complain that £5 notes are hard to come by and difficult to keep. There is also evidence that smaller denominations of notes can help people to budget. Amazing to think that after all these years, it will be possible to go to a cashpoint and just withdraw a humble fiver. Sign of the times, eh?

Ok so the football was rubbish

2010-06-28T07:28:00.000-07:00

from an England perspective anyway. So do we now switch to supporting Spain as a default second team, or maybe one of our other European neighbours ?
The way that things have gone in recent times you could be forgiven for wishing ill on places where you may have bought property, particularly given the problems in Spain.
But, we are all in the same boat to a degree, and a positive outlook to the future can be as beneficial in some ways as hard financial reality.
At the moment we are cheering the rise of the pound against the euro, which is good on 2 scores :-
Firstly, UK property owners in the eurozone have more affordability when it comes to paying their mortgages and paying for maintenance etc. And even holidaymakers have more ready cash to spend thanks to the exchange rate.
And secondly, for the Spanish there is an obvious benefit of more Brits able to spend euros in Spain. The exchange rate only affects them if they come to the UK. The flow of people and money has always largely been from UK to Spain, so the Spanish would no doubt prefer a strong pound.
Compared to other eurozone countries the exchange rate doesn't affect, for example, Germans on holiday, although relative prices between the countries do
Thanks for reading

9 reasons why Spain is a disaster waiting to happen

2010-06-15T15:41:00.000-07:00

1. Even before this most recent crisis, unemployment in Spain was approaching Great Depression levels. Spain now has the highest unemployment rate in the entire European Union. More than 20 percent of working age Spaniards were unemployed during the first quarter of 2010. If people aren't working they can't pay taxes and they can't provide for their families.
Also, in the 18-25 age group, there is now 40% unemployment, which is appalling. Spain is trying to address it's labour laws which make it very difficult to emplopy people on full contracts because it is very difficult to sack staff. Many are employed on short term contracts or cash-in-hand. As soon as interest rates begin to rise there will be big mortgage problems for those out of work as their monthly costs shoot up.

2. In an effort to stimulate the economy, Spain's socialist government has been spending unprecedented amounts of money and that skyrocketed the government budget deficit to a stunning 11.4 percent of GDP in 2009. That is completely unsustainable by any definition.

3. The total of all public and private debt in Spain has now reached 270 percent of GDP.

4. The Spanish government has accumulated way more debt than it can possibly handle, and this has forced two international ratings agencies, Fitch and Standard & Poor’s, to lower Spain’s long-term sovereign credit rating. These downgrades are making it much more expensive for Spain to finance its debt at a time when they simply can't afford to pay more interest on their debt.

5. There are 1.6 million unsold properties in Spain. That is six times the level per capita in the United States. Considering how bad the U.S. real estate market is, that statistic is incredibly alarming.

6. The new "green economy" in Spain has been a total flop. Socialist leaders promised that implementing hardcore restrictions on carbon emissions and forcing the nation over to a "green economy" would result in a flood of "green jobs". But that simply did not happen. In fact, a leaked internal assessment produced by the government of Spain reveals that the "green economy" has been an absolute economic nightmare for that nation. Energy prices have skyrocketed in Spain and the new "green economy" in that nation has actually lost more than two jobs for every job that it has created. But Spain so far seems unwilling to undo all of the crazy regulations that they have implemented.

7. Spain's national debt is so onerous that they are now caught in a debt spiral where anything they do will harm the economy. If they cut government expenditures in an effort to get debt under control it will devastate economic growth and crush badly needed tax revenues. But if the Spanish government keeps borrowing money their credit rating will continue to decline and they will almost certainly default. The truth is that the Spanish government is caught in a "no win" situation.

8. But even now the IMF is projecting that the Spanish economy is going nowhere fast. The International Monetary Fund says there will be no positive GDP growth in Spain until 2011, at which point it will still be below one percent. As bleak as that forecast is, many analysts believe that it is way too optimistic considering the fact that Spain's economy declined by about 3.6 percent in 2009 and things are rapidly getting worse.

9. The Spanish population has gotten used to socialist handouts and they are not going to accept public sector pay cuts, budget cuts to social programs and hefty tax increases easily. In fact, there is likely to be some very serious social unrest before all of this is said and done. On May 21st, thousands of public sector workers took to the streets of Spain to protest the government’s austerity plan. But that was only an appetizer. Spain's two main unions are calling for a major one day general strike to protest the government's planned reforms of the country's labor market. The truth is that financial shock therapy does not go down very well in highly socialized nations such as Greece and Spain. In fact, the austerity measures that Spain has been pressured to implement by the IMF have proven so unpopular that many are now projecting that Spain's socialist government will be forced to call early elections.

So what is going to happen in Spain? The truth is that nobody can predict for sure how things are going to play out over the coming weeks and months. But what everyone can agree on is that the stakes are incredibly high. Speaking at the World Economic Forum in Davos, Switzerland, world famous economist Nouriel Roubini put it this way: "If Greece goes under, that’s a problem for the eurozone. If Spain goes under, it’s a disaster." But right now the entire population of Spain (along with much of the rest of the world) is completely distracted by the World Cup. As long as the Spanish team does well, that is likely to keep the Spanish population sedated. But if the Spanish team gets knocked out of the tournament early that will put the entire Spanish population in a really, really bad mood and that could mean a really chaotic summer for the nation of Spain

Exchange rate above 1.20 again

2010-06-02T02:03:00.000-07:00

Hurrah - good news for all potential property buyers and mortgage holders in Spain, France, Portugal and elsewhere with the euro.

It seems to have taken a hell of a long time but the exchange rate has broken through the 1.20 mark.

Hopefully 1.20 was a psychological barrier and the rate will continue upwards towards 1.30

Great for anyone buying euros to pay for their mortgage overseas

Economic news from the UK seems to be more positive than the euro-zone, which is now helping the pound

Exchange rates market update

2010-06-01T03:58:00.000-07:00

The latest market report from our friends at Foremost Currency Group

Pound vs. Euro
Last week was one of relative strength for Sterling as it rallied against the Euro from levels of 1.15 on
Monday the 24th of May up to highs of 1.1872, last seen in June 2009 on Thursday afternoon.
Sterling’s strength did not come from its own strong economic fundamentals however, but more the
dire straits that the euro zone finds itself in and a report from The Organization for Economic Cooperation
and Development (OECD) which said that “due to the continuance of higher inflationary
pressures within the UK the raising of Interest rates by the MPC towards the end of the year were
inevitable.” These two factors combined sent investors flooding back to the pound and soaring against
its beleaguered neighbour.
Sterling’s Climb was however halted abruptly on Thursday, after news that UK consumer confidence
fell for the third consecutive month in May, reflecting uncertainty ahead of the election result and the
prospect of fiscal tightening once a new government was in power. This bad news was also coupled
with a release from The State Administration for Foreign Exchange (SAFE) China's foreign exchange
regulator who deploys the nation's excess reserves. It denied through its website that it was reviewing
its euro-area holdings saying, "Europe has been, and will be, one of the major markets for investing
China's exchange reserves” This single statement and positive tone helped the euro to gain ground
leaving behind its lows of earlier in the week.
With euro zone government debt worries outweighing concerns about the UK, one could expect to
see further downside for the euro, at least in the near term.
On Monday panic hit the currency markets and the Euro started to flounder as it came under renewed
pressure. This time instead of the pressure coming from the euro zones lead economy Germany,
who the week before had undermined the Euro with its ban on short selling, This time renewed
concerns about EU debt crisis continued to surface following comments on Monday from the IMF that
the Spanish economy needs reform. This comment came just as the rescue of Spanish bank Cajasur by
the Bank of Spain sparked fears about the stability of Spanish Banks.
Subsequently four Spanish banks have since announced plans to merge. These concerns have
hampered the Euro and lead investors to seek "safe havens" for their money with the US Dollar being
the big winner and the home of the majority of FX reserves worldwide.
To help combat the negativity surrounding the euro zone and its flagging currency Spain, Portugal and
Italy as well as Greece have all released austerity measures (Where a government reduces its spending
and/or increases fees and taxes to pay back its creditors) “ to try and ebb the flow of Euro zone decay.
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The continued weakness of the euro is a concern, with investors dumping the currency amid fears that debts
will cause defaults by weaker countries in the European Union. The single currency has fallen in value by
almost a fifth against the dollar in the last six months.
It is worth noting that Sterling is closely aligned with that of the single currency. Debt worries continue both
in the UK and Europe, Austerity measures have been announced by both and with 54% of UK exports
heading to Europe it is no wonder that the pound finds itself struggling against the Dollar whilst frequently
undergoing abrupt shifts and reversals against the Euro.
When reviewing the week’s data and fundamentals as mentioned, it continues to show the fragile state of
Sterling and the UK Economy.
Time will only tell but the continued economic weakness in both economies will halt the dramatic gains that
many had hoped for during the summer months and instead will be replaced by a volatile and uncertain
market.
Pound vs. US Dollar
Last week saw a 2.4% variation in cable between the highs and the lows of the week. This is as speculators
raise their bets against sterling to record levels after the formation of the new coalition government and
worries escalate over the health of the country’s finances.
Data released by the Chicago Mercantile Exchange showed that these speculators had further increasing
their short positions in Sterling taking the ration of short-to-long positions to nine-to-one. Essentially for
every one prediction that Sterling was set to gain strength, there were nine positions stating the opposite.
This overwhelming negative opinion of the pound saw a 14-month low for the Sterling-Dollar currency
pairing at $1.4230.
Jeremy Stretch at Rabobank stated however, that “with the ratio of shorts to longs almost nine-to-one, the
scope for a snapback in sterling on any better news remains significant.”
On Tuesday we saw a host of data releases including figures for Q1 GDP as well as the Queen’s Speech at the
State Opening of Parliament where key policy announcements were made with respect to future spending
plans.
As the dollar performs well against a basket of currencies, sterling has been rather sensitive. Whilst data
showed that the British economy grew 0.3% this first quarter, the currency has still lost more than 11
percent against the dollar this year.
This sensitivity and thus possible volatility is likely to be tested further as Chancellor George Osborne
announced 6.25 billion pounds of public spending cuts in an effort to trim the budget deficit.
The dollar as well as the yen both gained ground this last week as nervous investors pondered the escalating
tensions in South and North Korea and the euro-zone sovereign debt crisis.
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As the dollar experienced renewed safe haven status due to issues within the Korean Peninsula, the
euro fell below $1.22 as concerns over the European banking system after the recent bank bailouts in
Spain increased.
Whilst Britain’s fiscal deficit is running at some 11% of GDP, the new government has been setting out
measures to lower it and as a potential boost for sterling; the evidence that there are rising
inflationary pressures which some analysts think may prompt the Bank of England to raise interest
rates before the end of the year.
The remainder of the week saw a worse than expected annualised rate for Q1 GDP in the United
States and sterling was able to make some gains on that news coupled with a light data calendar that
left the market focusing on external factors, primarily movements in risk and equity markets.
During this week of ups and downs, we here at the Foremost Currency Group have been helping
clients secure the best possible rates for their currency purchases.
One of the tools at our disposal, the Stop Loss and Limit order, helps clients to optimise their
purchase. By talking to your account executive and knowing where to place a minimum and/or
maximum on your exchange rate it is possible to safeguard against any potential loss should the
market drop and ensure that you are able to take advantage of any upward spikes without having to
watch the currency markets.
For the week starting 31st May, the U.S. as well as the U.K. had bank holidays on Monday. This leaves
important U.S. data releases on Tuesday concerning manufacturing levels and Friday concerning both
Non-Farm Payrolls and unemployment rates.
See the relevant data releases below for a concise round-up of volatile market movers; however it is
well worth taking the time for a consultation with your Account Manager here at the Foremost
Currency Group. We keep abreast of economic data releases and opinion polls to allow us to deliver
sound market knowledge, helping maximise your Sterling/Dollar currency potential.

Europe's debt problems

2010-06-01T02:22:00.000-07:00

Have borrowed most of the information below from the Associated Press, as it makes enlilghtening, if slightly scary reading.

ITALY:
2009 debt: 115.8 percent of gross domestic product
Deficit: 5.3 percent of GDP.
2010 growth estimate: 0.8 percent.
2011 estimate: 1.0 percent.
Unemployment: 8.6 percent.
Italy has piled up lots of debt but so far has been spared the troubles plaguing Greece. Bond markets are still willing to lend at affordable rates in the belief the country will make good on its debts.
Still, rising market pressures on other countries has forced Prime Minister Silvio Berlusconi's government to announce spending cuts to reassure bond investors the country's finances are under control.
That surprised Italians after they had been assured for months by Berlusconi and his aides that Italy would escape the government crisis without painful measures.
Berlusconi announced euro25 billion ($30 billion) in budget cuts for 2011-2012 to reduce the deficit to 2.7 percent of GDP by 2012. The cuts target the country's bloated bureaucracy and aim to recoup some of the estimated euro120 billion Italy loses to due widespread tax evasion.
While welcoming the measures, Italy's main industrial lobby Confindustria said they don't do enough to spur Italy's perennially sluggish growth.
___
GREECE:
2009 debt: 115.1 percent of GDP.
Deficit: 13.6 percent.
Deficit projection for 2010: 8.1 percent.
2010 growth estimate: minus 4.0 percent.
2011 estimate: minus 2.6.
Unemployment: 12.1 percent
Europe's problem child, Greece spent itself into trouble with a bloated public sector and widespread tax evasion, then lied about the shape of its finances. In October, a new government shocked markets by announcing the debt was 12.5 percent of GDP, more than four times the previous government's estimate. It has subsequently revised up to 13.6 percent.
Revelations that past governments had fudged statistics further undermined market confidence. As a result, bond markets hammered Greek debt and refused to lend to Greece at an affordable rate.
Prime Minister George Papandreous's government was forced to take a euro110 billion bailout from the eurozone countries and the International Monetary Fund to avoid defaulting in May. Many economists think Greece will eventually have to restructure its debts despite the bailout because of its weak economic growth.
Debt is projected to peak at 149.1 percent of GDP in 2013 before beginning to fall the following year. Greece faces the double challenge of massive debt, which stands at about 310 billion euros, and the harsh austerity measures imposed in order to release the eurozone-IMF rescue loans are expected to dampen consumer spending.
With no particular industrial output to speak of, Greece is a heavily consumer-based economy, so the recession will further hamper the government's efforts to pull itself out of its debt crisis. Tourism, one of its main industries, is already suffering after television images of Greeks rioting over austerity plans.
___
BELGIUM:
2009 debt: 96.7 percent of GDP
Deficit: 6 percent.
2010 growth estimate: 1.3 percent.
2011 estimate: 1.6 percent.
Unemployment rate in March: 8.1 percent.
Belgium's reliance on trade has hurt the economy in the last two years ago, but the recent recovery in European exports — many routed through the busy port of Antwerp — has helped the economy return to growth. However, the country's persistent budget deficits and uncertainty over political reforms that could transfer more power from the federal government to the regions mean that it may face problems curbing a debt mountain that will top 100 percent in 2011.
___
FRANCE:
2009 debt: 78.1 percent of GDP.
Deficit: 7.5 percent of GDP.
2010 growth estimate: 1.4 percent.
2011 estimate: 2.5 percent.
Unemployment: 10.1 percent.
Five months after unveiling a euro 35 billion "Big Loan" aimed at spurring France's moribund economy to life, French President Nicolas Sarkozy announced this week that tackling 30 years of accumulated deficits is now a "national priority."
A three-year spending freeze, combined with a crackdown on tax loopholes and other measures are now promised as a way of bringing France's deficit under the 3 percent threshold enshrined in EU rules by 2013. Of cource, Sarkozy once promised to achieve that by this year, but that was before the crisis.
French government forecasts of 2.5 percent growth from 2011 onward are optimistic compared to estimate of only 1.7 percent growth from the Organization for Economic Cooperation and Development, a grouping of developed countries.
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PORTUGAL:
2009 debt: 76.6 percent of GDP
Deficit: 9.4 percent of GDP
2010 growth estimate: 0.5 percent
2011 estimate: 0.9. percent
Unemployment: 10.5. percent
Portugal's economy, burdened by low education levels and labor laws that make hiring and firing difficult, has been struggling to get traction since the turn of the century, with growth averaging less than 1 percent since 2000.
Traditional industries such as textiles and footwear have shrunk under global competition while tourism, which generates 10 percent of economic output and jobs, has slumped amid the global economic crisis.
The minority center-left Socialist government is trying to develop high-tech sectors such as renewable energy but as a small country of 10.6 million people Portugal is dependent on growth in its European trading partners for an export recovery. It is also trying to increase trade with developing nations, especially Angola, its former colony, and Portuguese-speaking Brazil.
The government predicts the national debt it will peak at 90.1 percent of GDP in 2012 before falling back.
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GERMANY:
2009 debt: 73.2 percent of GDP
Deficit: 3.1 percent of GDP
2010 growth estimate: 1.4 percent
2011 estimate: 1.6 percent
Unemployment: 8.1 percent
Germany, the eurozone's biggest economy, cut its budget deficit to zero in 2008 but then saw it return last year in the wake of the global financial crisis. The government says this year's deficit will be above 5 percent, but it has pledged to get back below 3 percent by 2013.
The constitution has a "debt brake" that forces the government to cut back borrowing over the coming years.
Germany's recovery has been heavily reliant on exports, and domestic demand has been a weak point for years. Chancellor Angela Merkel started her second term last October pledging tax relief to boost the economy but her new center-right government delivered only a modest package of measures.
Merkel pushed hard to make sure the European Union's bailout of Greece was accompanied by promises of harsh cutbacks, and some accused her of making the crisis worse by delaying. Bailing out Greece was unpopular at home, and Merkel's party suffered a state election defeat in May that deprived her government of a majority in the upper house of parliament.
Merkel declared that further tax cuts won't be possible until 2013 and the emphasis will now be on keeping debt under control. She hasn't yet detailed possible spending cuts but has indicated that education will be spared.
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IRELAND: 2009 debt: 65 percent of GDP.
Deficit: 14.3 percent.
2010 growth estimate: minus 0.7 percent.
2011 estimate: 3.0 percent.
Unemployment: 12.6 percent.
Ireland enjoyed Europe's longest sustained growth from 1994 to 2007 amid unprecedented investment by foreign high-tech firms seeking a low-tax base in the European Union.
But the Celtic Tiger boom collapsed amid the global credit crisis, which exposed the country's reckless reliance on foreign lending and property speculation to fuel spending. In its annual budget in December, Ireland slashed pay for state workers, cut welfare benefits and imposed new environmental taxes on fuel as part of a record euro4 billion ($6 billion) in budget cuts to combat the runaway deficit.
It was rewarded for the budgetary constraints with far lower market borrowing costs than Greece. The Irish government said recently it is on track to cut its deficit to be in line with the European Union's limit of 3 percent of GDP by 2014.
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BRITAIN:
2009/10 estimated debt as percentage of GDP: 62 percent.
Deficit: 10.4 percent.
2010 growth estimate: 1-1.5 percent.
2011 estimate: 3-3.5 percent.
Unemployment: 8 percent.
Public finances in Britain, which does not use the euro, have shown signs of slowing deterioration in recent months, but remain at record levels.
Britain does have some advantages over countries like Greece: it prints the currency in which its liabilities are denominated, so it can devalue and make its exports more competitive. It is considered a surer bet for repayment, maintaining a triple-A credit rating. Still, the new coalition government headed by Prime Minister David Cameron of the Conservative Party has made cutting debt its priority to get the country "back open for business."
Britain was hit particularly hard by the global credit crunch because of its huge financial sector, and the government carried out a multibillion pound bailout of major banks even as levels of personal debt soared among consumers. Like the US, it also faced a collapsed real estate bubble.
The European Union has warned that Britain's deficit is likely to hit 12 percent of GDP this year, four times what the bloc considers acceptable. Debt is expected to reach 88 percent in 2011 or 2012, overtaking the EU average.
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NETHERLANDS:
2009 debt: 61 percent of GDP
Deficit: 3.4 percent of GDP
2010 growth estimate: 1.5 percent.
2011 estimate: 2.0 percent.
Unemployment: 5.9 percent.
The Netherlands went into the financial crisis with the best national finances it had seen in decades, and all main parties committed to pruning the welfare state — with different emphases. The country has a competitive, open economy, natural gas resources, and is a net exporter, especially of agricultural goods.
But its unusually large financial services sector led to an abrupt spike in national debt largely due to bailouts during the crisis.
Although the Dutch are in an anti-Europe mood and many would love to see the return of the guilder, policymakers recognize that but for its euro-membership, the Netherlands might well have wound up like Iceland and seen its currency and banking system collapse.
Dutch national elections are scheduled for June 9, and major battlegrounds include whether the retirement age should be raised to 67 from 65 and whether to scrap the tax deduction on mortgage interest. Anti-Islam politician Geert Wilders is trying to halt a big slide in the polls by arguing that non-Western immigrants cost the country euro7 billion per year.
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SPAIN: 2009 debt: 55.2 percent of GDP
Deficit: 11.2 percent of GDP
2010 growth: minus 0.3 percent.
2011 estimate: 1.3 percent.
Unemployment: 20.05 percent.
Spain is grappling with the twin woes of a moribund economy and a lopsided deficit that is triggering fears of a Greek-style debt crisis. The government has cut spending to chip away at the deficit, but acknowledged that this will also chop half a percentage point off its forecast for growth in 2011, down to 1.3 percent. And there are doubts over whether that level of growth can generate net employment and ease the 20 percent jobless rate. Before the economic crisis, Spain relied heavily on free-flowing credit and a red-hot construction sector.
Now it is search of a new growth model and there are no obvious solutions. Business leaders and many economists say the government must reform the stodgy labor market to encourage employers to hire and restore a climate of confidence.

Spain bails out CajaSur bank

2010-05-26T02:07:00.000-07:00

So, Spain has finally had to bail out one of their banks. The most surprising thing is that it has taken this long. The Spanish banks and Government have spent the last 2 years maintaining that they were in a better state than all the other countries that have bailed out banks etc. It has been clear to see though, from the state of the construction sector, and employment, that the banks in Spain, particularly the Caja's, were sinking under a sea of real estate debt and non performing loans and mortgages. So now, Spain is having to bailout CajaSur, almost two years after Northern Rock and the US banks, and with the situation of Greece etc so much worse. So rather than being better off, Spain is in a worse state, and 2 years behind........

Spain's new age of austerity

2010-05-20T14:26:00.000-07:00

The Spanish government has approved a 15bn-euro ($19bn; £13bn) austerity plan to rein in the public deficit and ease fears of a Greek-style debt crisis. Many Spanish jobs enjoy 13 monthly salaries, as many Greek civil servants had a 13th and 14th monthly payment.
The programme is intended to reduce a deficit of 11% of GDP to 6% by 2011.
The plan, unveiled last week by PM Jose Luis Rodriguez Zapatero, will involve a 5% cut to public sector salaries.
Many Spaniards fear the effect the cuts will have on the economy, where the unemployment rate exceeds 20% - twice the eurozone average. There must be so many families struggling to pay mortgages and spend in the economy.
There was some economic cheer last week, when statistics showed Spain had moved out of recession in the first quarter of this year, with growth of 0.1%. In Spain over the weekend someone remarked to me that the Spanish have now spent most of their "mattress money" that they had following entry into the euro, and that many had acquired selling land or doing "black" real estate deals.
The European Union has been anxious to see more fragile European economies including Spain, Portugal and Greece impose tougher austerity measures.
This month, the EU approved a 750bn-euro rescue package to prop up European economies struggling with large debts.

New Malaga Airport, reflects the mood in Spain

2010-05-20T06:54:00.001-07:00

We just flew in and out of Malaga airport, where the magnificent new terminal building is a gleaming glass and steel construction.....from the outside.
Inside it's like the mood in Spain, grey and dreary. How did they make a new airport so miserable ?
Named after Pablo Picasso, there isn't much of the inside that is colourful or artistic.
What's worse is the way we were treated there, we came away feeling like we had walked a mile and been scammed on the way!
First of all we checked in at the old terminal desks, but instead of walking through the back into security, they made us walk all the way to the other end of the new terminal building, where they have temporary security desks setup. Then, we found that our gate was all the way back in the old terminal.
the upshot of this is that you have to walk all the way through the departure area of the new building, in order to get back in the old building, and past all of the new shops and bars and restaurants.
We basically walked for ages for nothing.
And the whole "no liquids" over 100ml feels more and more like a scam each time we go through security. Since the restrictions the airport bars and restaurants in departures must be laughing all the way to the bank. €2.95 for a bloody diet coke - absolutely fucking shocking
It has always felt to a degree that Spain has been happy to fleece the foreigners. Given the shit that the country is in right now, theyshould think again....

Spain budget cuts

2010-05-12T05:32:00.000-07:00

News coming from Spain of further proposed budget cuts in order to reduce the deficit. Timing would seem to be important, following on from the announcement of the 750bn euro bailout fund. I guess the eurozone wants Spain to be making promises of cuts, before the EU has to insist on levels of cuts, like they did with Greece. If Spain was caught dawdling in the wake of the bailout fund, then I think the markets woud punish them and send the shit into the fan, with borrowing costs going through the roof. Even Mr Obama has put his oar in, commenting specifically on Spain, and making a clear point that the US is taking careful note of happenings in Europe.
Quite what Mr Zapatero is going to do is another thing - spening cuts - which must include the loss of civil service lackeys, when the unemployment rate is already 20%, is going to hurt

Coalition of the losers

2010-05-11T02:37:00.001-07:00

Now Nick Clegg has taken to standing on the street corner, in his best yellow hot pants, negotiating with both the Tories and Labour over which one he is going to shag

A Lab-Lib alliance, a coalition of the losers, just doesn't feel right

Imagine Man United, at the end of the season, doing a deal with Wigan and claiming to be Champions !

Power of the markets

2010-05-11T02:33:00.000-07:00

So after yesterday's enormous gains on stock markets around the world, following the eurozone 700bn bailout deal, markets fall today because apparently markets are scared about it, and the French and Germans are still unhappy that they are underwriting the Greeks still

But where sis anybody think the money was coming from anyway. The eurozone is going to be propped up by money that they have borrowed from each other and themselves.

And also rumours that Greece and Spain are going to be downgraded further by Moody's

If the markets have it against you, then whatever you do, you don't stand a chance......

Fast track demolitions in Spain

2010-05-10T08:37:00.000-07:00

As if things weren't bad enough for many homeowners in Spain, comes this story from yesterdays Sunday Telegraph

Owners of homes which are retrospectively judged to have fallen foul of regional planning rules can now be given just one month's notice that council bulldozers are being sent in, as part of a crackdown on excessive development in one of Spain's most popular regions.
Thousands of homes that were bought or built in good faith across the area are at risk since the regional authority began reviewing local councils' planning approvals - and concluded that in many cases, permission to build should never have been granted.

The threat of sending in bulldozers at short notice has horrified the estimated 5,000 Britons with properties in the hillsides of Almanzora, one of the worst affected areas 60 miles north of the coastal city of Almeria in southern Spain.
Hundreds of properties have already been served with demolition orders, but most homeowners had not felt under immediate threat because of Spain's slow-moving legal system. They believe that the fast-track demolition orders will change that.
"The fast-track orders could speed up the legal process and hasten demolitions," said Maura Hillen, who organised a mass rally against them in Malaga. To add insult to injury, after a demolition the victim would have to pay the municipality for the bulldozer.
"We are really worried about express demolition, because officials here have a habit of doing crazy things," she said.
The former IT specialist in the City of London, aged 46, has set up a group of Britons who, like her, have been given demolition orders. They are using skills from their former professional lives and funds raised from car boot sales to pay for their campaign.
They call themselves the "Albox 8", after the small town where they live, whose population has risen from 15,000 to 22,000 over the last decade. Builders and property developers prospered as new villas sprouted during a four-year property boom that began in 2000, and local officials praised the foreigners who brought money to the impoverished region. Almost overnight, on dusty roads where there had once been plodding donkeys, newly rich farmers were driving Mercedes limousines.
Then Spain's overheated property market was rocked by a series of corruption scandals, and the regional government began scrutinising permission granted by local council officials.
Half-built properties are thought to be at greatest risk of the new, prompt demolitions, putting people like John and Liz Brown, originally from Hampshire, into the firing line.
The whitewashed churches and almond groves seen from their villa make up the kind of spectacular view they dreamt of before they took the plunge and sold up in Britain.
But the couple have never moved into a property on which they spent £140,000, after a court order stopped construction before the windows were fitted. Since then they have fought a legal battle to be allowed to live there.
Now there is a real chance that officials will send in a bulldozer in the coming months to flatten the house on which they have spent their life saving, but where they have never lived.
"Spain is a lovely country with friendly people and a wonderful lifestyle but when it comes to law, this is the Third World," Mr Brown said, standing amid rusting cans and scattered breeze blocks where his swimming pool was supposed to be.
"It was always our dream to retire here and we worked hard to do it. But now I wish I had never bought a property. People in Britain who are thinking of coming here should know what they are letting themselves in for."
Other residents of the region were equally perturbed. Expatriates fear that any day an official could knock on their door with a legal order declaring their dream home was built without the requisite permission. Every time a JCB digger drives into the area there is panic.
The dashed dreams are particularly cruel for retired couples like the Browns - another member of the Albox 8 - who are too old to start again.
"We spent all our savings on this villa," said Mrs Brown, 60, a former driving instructor. "We can't go back to Britain because we have burnt our bridges and we haven't got anything left." Her husband has had cancer for the past year. Mr Brown, 72, is a former soldier and veteran of the Malayan campaign, who worked for British Airways before his retirement.
Some residents served with demolition notices have suffered stress-related illnesses and one, Muriel Burns, said she had been suicidal since being served a demolition notice just before Christmas.
Mrs Burns, 70, and her husband John, 82, originally from Batly in West Yorkshire, have pledged to handcuff themselves to the French windows and die together inside their tastefully decorated living room if the bulldozer comes.
The result has been crippling for Britons who in most cases bought in good faith, trusting Spanish property developers, lawyers and local officials to provide the correct paperwork. Most have been horrified to discover their houses may lack the necessary permission.
Juan Espadas, the former housing and town planning minister for the regional government, defended the measure introduced during his tenure. "This express demolition law will only be applied in very illegal cases," he said. "In all cases the owners will have the opportunity to defend themselves."
Since the financial crisis hit, the expatriates' enviable lifestyle has been hit by a falling pound, negative equity, and a shrinking jobs market, on top of demolition fears.
"Half the British you speak to now are leaving or want to leave," Mr Brown said. "The way it feels here, the Spanish dream is over."

Spain out of recession, maybe.....

2010-05-10T04:43:00.000-07:00

After seven quarters in recession, it seems that Spain may have finally crept back into growth, by a small margin - 0.1%.
Given that unemployment is so high in Spain it must be good news that the part of the economy that is working, is improving.
Along with this we can see that a deal has been agreed to hold a rescue fund for the eurozone, in the wake of the Greece crisis, that, it is hoped, will provide some security to other territories that are in danger of being punished by the financial markets and plunged into crisis.
But even though this seems to be having the required positive effect on the stock and currency markets around the world, the money still has to come from somewhere. The other eurozone countries have effectively stated that they will be supporting each other in case it looks like a single country cannot meet it's debt obligations.
The worse thing about this, potentially, is that the most at-risk countries - the famous PIIGS, of Portugal, Ireland, Italy, Greece and Spain, will just carry on with their old ways, in the knowledge that they will be bailed out.
Anybody that knows Spain, will know that there needs to be substantial reform in a number of areas, including employment, tax law (where evasion and black money is still rife) and property.
Consider the various complicated tax laws and costs surrounding the property and mortgage markets, and how they could be simplified to kick-start the Spanish property and Spanish mortgage markets. The combined costs of buying a property in Spain with a mortgage, can often add up to about 14% of the purchase price of a property, which is plainly ridiculous. How much would the construction and property industry benefit from getting rid of most of the stupid taxes ?
Spain is full of empty and unsold property at the moment, which the indiginous population - the younger, next generation of property buyers, simply cannot afford at the moment. If you remove some of the taxes, then the youngsters will be able to leave the family home and buy their own place.
Also, losing the taxes would certainly have an impact of attracting more foreign buyers, including Brits, back to the Spanish market.
A small growth does not mean they are out of the woods, there is still much that could be done.

Well Hung

2010-05-07T02:35:00.000-07:00

So, as of now, we don't know who is going to be PM, or indeed the main party in charge of running the country.

Sterling is down 3 cents against the euro and the markets react strongly to the idea that nobody will be able to agree with each other on the best way to move forward and handle the deficit.

Something needs to be agreed asap so that we can start to implement some measures to sort out the economy. Given the uncertainty happening in Greece and the Eurozone, we could benefit greatly from decisive action.

The cost of Greek and Portuguese debt continues to rise, so it looks increasingly likely that Portugal is going to require some form of bail out

For overseas mortgage holders, the continued weakness of the pound, is of concern, and it must be said that the state of the economies in these countries will undoubtedly have an impact on the owners of holiday properties there.

Spain Bailout rumour

2010-05-04T07:53:00.000-07:00

Apparently a rumour is doing the rounds in financial markets that Spain will need a bailout to the tune of 280 billion euros. This comes after the Greek rescue package was thrashed out at 110 billion over the weekend.
This is being strongly denied by Spain , as it could easily cause damage to the markets and may be a ruse to enable some financial dealers to make a quick buck.
But in many things in life, there is no smoke without fire, and very often rumours have at least some element of truth to them.
So we wait and see what is going to happen with Spain. On the face of it, Spain is maintaining that it's situation is a lot better than that of Greece, which, if true, would make a bailout of that magnitude seem unlikely

Spanish Unemployment tips over 20%

2010-04-30T01:33:00.000-07:00

So today they announced that the official unemployment rate in Spain has exceeded 20% for the first quarter of the year, adding another 300,000 people to the jobless total

That makes 4.6m in total - is 5m the next milestone for this figure, or will things improve ?

Certainly the Spanish Government has plenty of other things to worry about, particularly with the credit rating cut and the potential circling of the bond market vultures.

The problem with the unemployment is that much of it has come from the construction and property related sectors, and those jobs are just not coming back, because until much of the unsold stock has been absorbed by the market, there just isn't going to be that much construction going on.

In terms of the property and mortgage market, another 300k unemployed puts more pressure on the banks that hold the mortgages of these people

I fear for Spain at the moment

Eurozone House of cards looks shaky

2010-04-29T02:30:00.000-07:00

So on the back of the Greek tragedy comes the credit rating downgrades for Spain and Portugal, amid concerns for the remaining PIIGS of Ireland and Italy.

The thing is, you just get the feeling that once these things start, it just carries on and on and will cause a huge problem in the eurozone.

With any luck the UK won't get dragged into it as we are outside the euro zone, but there is a lot of debt, and if the markets decide to focus on the UK we may find ourselves in the shit.

Although coming out of recession there are good indicators of things imrpoving in the UK, so after the election is sorted we may see some benefits to sterling, as the UK may be seen as a safe haven for currency investors, rather than the euro.

The strength of the eurozone is clearly that it is made up a a number of nations and a variety of economies. The problem is that all these countries are still governed independently so there is a lot of politics involved when northern economies like Germany have to bail out perceived lazy "Club Med" Europeans in Greece, Spain, Italy and Portugal etc.

From a Brit perspective I think the Euribor has to remain low in the eurozone, and surely the Spanish banks can't start charging huge margins on their mortgages. For any Brits with mortgages overseas, particularly in euros, then a rise in the strength of the pound might be a silver lining in terms of mortgage costs, and also may help the Spanish property market as property that has fallen in value may seem even cheaper to British buyers

Thanks for reading

Green Light for Marina D'Or expansion

2010-04-28T04:15:00.000-07:00

The Valencia government has agreed to the expanision of the Marina D'Or development by 30,000 homes, which will make it the biggest holiday resort development in Europe.

There are to be 3 new golf courses, which they plan to build first, leaving the property construction until the property market recovers.

I guess that their rationale will be that there will be a market for more "off-plan" sales, and that the size and status of the existing development will attract buyers to a safe investment.

It will be interesting when they try and get the funding for it.

Size and reputation hasn't helped La Manga and Polaris much recently.......

Sales and lending on the up......

2010-04-27T02:41:00.000-07:00

Recent reports that sales in the Spanish property market had finally turned, year on year, were followed up today by the news that mortgage lending has increased in February, year on year, for the first time in 3 years.
No indication as to the breakdown of the type of lending that is involved, all I know is that we aren't seeing much of an unfreeze in the non-residents and holiday home market.
I guess that should be expected really, that the Spanish banks will return to lending to the Spanish Nationals first, as they can find out more information about them, and understand more about their employment and lifestyles.
But, surely the unemployment rate, that is expected to tip over the 20% level soon, is going to have a big impact on the population's ability to borrow and repay home loans ?
As the signs of improvement continue in the UK, albeit slowly, then the Spanish banks will be aware of this, and hopefully they will again make it easier for UK borrowers to get mortgages and refinance in Spain.
Nobody wants a return to the bad old days of dodgy lending practices, with little paperwork and over inflated valuations, all designed to help bank managers to meet their targets and bonuses.
Let's hope the upturn allows us to return to offering a sensible level of lending to fundamentally sound clients.
Thanks for reading

IMF warns Spain over economic future

2010-04-22T09:10:00.000-07:00

The International Monetary Fund (IMF) has said today that Spanish banks will need 22 billion euros to cover the loss of value of assets if the crisis worsens, and predicts that bad debt will continue to rise. In a study conducted in collaboration with the Bank of Spain, the IMF predicted that non-performing loans and the recovery of property for nonpayment will continue to rise, which will weigh heavily on the balance sheets.
According to the IMF, savings banks are especially vulnerable, and it called for a comprehensive restructuring of the sector before June, when the Banking Ordinance Restructuring Fund (BORF) is due to expire.
Since the fall in house prices and the recession have been more dramatic in Spain than in the rest of the Euro zone, some analysts have questioned whether the financial sector has sufficient reserves to withstand the blow, despite the fact that Spanish banks entered the crisis with higher reserves than in other countries.
The IMF has tried to provide an answer in its "Global Financial Stability Report, released today, which devoted a section to Spain. The IMF first analysed the situation of Spanish banks, assuming that economic forecasts are met and the crisis slows down.
In this case, 6.3% of bank loans will be in arrears in the third quarter of this year (6% in the case of savings banks), but from there the situation will improve and by the end 2011, the bad debt will have fallen to 5.1% and 5% respectively.
If this is the case, the loss of asset value would be 1 billion in the case of banks, whilst savings banks would lose 6 billion, because their incomes are lower and they have a larger portfolio of properties owing to defaulting on mortgage payments, according to the IMF. The IMF said that the income and provisions of the financial sector would allow for these losses to be fully absorbed.
However, the IMF also submitted the financial system to a tougher hypothetical test, using a more pessimistic scenario in which unemployment exceeds 24% in 2011, as occurred in 1994, with housing prices falling 15% this year. In this case, bad debt would jump to 7.8% for banks and 7.1% for savings banks in 2011. After taking depreciation into account, the banks would lose 5 billion euros in capital and the savings banks 17 billion.
Nevertheless, the possible losses "are relatively small compared to the overall capital of the banking system," according to the IMF.

Exchange rates - I just don't know anymore

2010-04-22T01:48:00.000-07:00

So the sterling to euro exchange rate has begun to creep up again, to around the 1.15 mark, which I think is something to do with the news that Greece has gone cap in hand to the IMF, despite saying for ages that they wouldn't need help. so it looks, I suppose to the markets that the eurozone may suffer for longer than the UK, because of having to drag the PIIGS out of the proverbial shit.
But, at the same time, it now looks increasingly like we may have a hung Parliament in the UK, which would supposedly be bad for sterling as there will be no clear economic policy or agreement, and hence uncertainty, which the markets hate.
So which one is it, and can we rely on anything affecting the markets in the way we expect, any more ?

Capitalism - a love story

2010-04-21T04:26:00.000-07:00

I have been watching the latest Michael Moore movie, which is highly recommended.

Two things in the first half of the movie that are quite shocking :-

Certain big US companies take out life policies on their employees, with the company as the beneficiary in the event of death. These are sold to the companies as a kind of investment - take out a policy on all of your employees, and if more than expected die, then the company will profit from the situation. This isn't for key employees that would cause the company to lose money or be disrupted if the employee died. Rather they are policies on the ordinary Joe's that stack the shelves at Wal-Mart etc. Astounding.

The second item was some interviews with young US airline pilots. I would have expected all qualified airline pilots to make a decent salary. Hell, I want my airline pilot to earn enough so that he doesn't worry about paying the rent or putting food on his table. One pilot earns €17,000 a year, and the other was on about $20,000. They tend to have enormous student loans to repay, and have to take second jobs to make ends meet. Indeed, the movie points out how baffling it is that a pilot can earn less than a supervisor in Taco Bell !!!!!!

There's plenty in there about banks and housing that I will comment on in more detail when I have watched the rest of the film

Planes back in the skies

2010-04-21T04:15:00.000-07:00

Last night in bed (we live near Gatwick) we heard the roar of a plane coming into land, after several days of blessed silence
Although this morning, driving past the airport on the way to work there still were no planes to be seen in the skies
Debate now rages about whether the security measure were necessary, and various estimates are being bounded about of the cost to the airline industry etc
What is clear is how we have come to take it for granted that we can fly off at short notice to France, Spain, Italy, Portugal and further afield.
Hopefully the big sister volcano isn't going to kick off and cause a much bigger problem. Although it is kind of comforting that despite all our technology, we are still at the mercy of this big old planet. Mother nature is still the boss!

Holiday Home bargains

2010-04-20T04:27:00.000-07:00

I read a report which quoted heavily from our mortgage competitors, Conti Financial. I couldn't tell if it was a genuine news story or simply a bit of propoganda put out like a press release. Anyhow, it was a load of wishy washy non-information about prices and them having more mortgage applications than any time in the past year.
No real figures or stats, and no mortgage information to speak of, as we know that the Spanish mortgage market is still very much in lockdown. There are still so many fears about the economy and valuations that LTV's are still being held down, and the criteria for borrowing, is still incredibly tight. Things will improve at some point, but until they do I think it is rather dangerous to start "talking up" a market that just isn't there.
The article had room for comments below, and they were getting quite a kicking from people that had read the article and clearly aren't that stupid.

Counting the cost of the volcanic ash

2010-04-20T04:19:00.000-07:00

As the news is now filled with horror stories of passengers stranded thousands of miles from home, we wonder what the impact of this disruption will be on the tourism and property markets in Spain and elsewhere ?
Sure, anybody stranded is being forced into staying and spending (the airlines) money in bars and restaurants, but that is out of necessity rather than the same as a more free-spending holiday.
But as for all of those that haven't been able to travel yet - will they be able to fit their bookings in again or simply take a refund and give up ?
Airlines may have to put their prices up, to compensate for lost revenue, which may further deter UK based travellers from flying to the eurozone, and possibly investing in property.
The economies of countries, airlines, and property markets were all in a pretty shaky situation anyway, without this latest setback.

Empty Houses - no wonder really

2010-03-10T09:46:00.000-08:00

Driving the coast of the Costa del Sol at the weekend, it was noticable how many developments have either ground to a halt, or are finished but plainly empty and unsold. In the cold light of these credit-crunch times, it is easy to see the evidence that many ignored during the years of construction boom, that is, often the property that is left over is in shitty locations and often poor quality design.
Witness the apartments close to La Cala that were started late in the boom, during 2006/7 and are virtually under the N340 coast road flyover. So they were on cheap land, a crappy location, and not a very inspiring (or expensive) design and construction.
Now, they are just standing there, half finished red brickwork, all scaffolding and evidence of materials and tools have long gone. So, who the hell is going to buy these places, who is going to finish them and try and sell them, and what banks are going to give mortgages for them ?
The most likely thing seems to be that they will stand, ugly and idle, for a number of years. Maybe they will be knocked down ? Perhaps become social housing ?
Never has the old adage "location, location, location" been more apt. When people talk of the property market in Spain, they often fail to realise or mention that there is likely to be a recovery in the market for decent property in good location - ie demand, whereas rubbish apartments in poor locations could languish for years.
We still wait for some thawing in the mortgage market - so bank managers seem to have targets for lending to try and meet, but it will need a relaxation of terms to really help
Thanks for reading - check out the mortgage site http://www.europamortgages.com/

The rain in Spain........

2010-03-09T06:52:00.000-08:00

A few weeks ago we were in Cartama, Malage, collecting some bits and pieces from our house, and the rain was just biblical. You couldn't avoid getting absolutely drenched. On our return to the UK we booked to come out again on the 4th March, in the expectation that it would be at least dry and sunny, if not exactly sunbathing weather.

How wrong we were, 4 days of useless, wet weather, floods, damp in the house, leaky roof and mud everywhere.

My business partner had been complaining that it had rained since December, and I was starting to believe him.
In every bar and restaurant we went into (there was nothing else to do....) the owners were complaining at the weather and the effect on business, as well as having to stop the rain coming in the roof and doors and windows.

Still the coast seems very quiet in terms of property development and sales activity. Plenty of developments are standing unfininshed, sales offices are closed, and the flags are as limp and damp as the market.

Much talk is of Spain following Greece in becoming an even more high profile EU member in need of a serious bail out.

The rain in Spain - when will it end ?

For rent - House in Malaga with land and stables

2010-01-27T03:09:00.000-08:00

This property is available now for long term rent. The cost of livery for horses can be expensive, and there is a shortage of houses available with decent quality stables and flat land suitable for horses.

This property features a 3 bedroom main house, a one bedroom guest cottage, a large office/gym, swimming pool, garage, tennis court, and 3 large stables with rubber flooring. There is 15.350 square metres of flat land, arranged over 2 terraces. Views of the Guadalhorce valley are spectacular.

Offered for rent at €1.300 per calender month. For more details contact chris@europamortgages.com

Pool and terrace with pergola

Large office / gym / games room

Landscaped garden areas with palm trees

From left to right, Guest Cottage, Main House, Office

Demand for goods the problem in UK

2009-11-16T05:22:00.000-08:00

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.

Eurozone exits recession

2009-11-13T04:08:00.000-08:00

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.

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

2009-11-12T05:20:00.000-08:00

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

2009-11-12T02:19:00.000-08:00

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

Better unemployment figures

2009-11-11T03:51:00.001-08:00

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.

Andalucia Subsidy for Homebuyers

2009-11-10T06:45:00.000-08:00

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.

Criticisms

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"

2009-11-10T05:05:00.000-08:00

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.

Decision Day for central banks

2009-11-05T02:06:00.000-08:00

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 www.europamortgages.com

Self-Cert lenders almost gone

2009-11-04T08:42:00.000-08:00

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

2009-11-04T08:09:00.000-08:00

Below is this weeks currency market report provided by our friends at www.foremostcurrency group.co.uk.
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.
Conclusion

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.

Monday
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

Wednesday
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

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

Friday
US - Non Farm Payrolls

Spanish Mortgages - Toxic Assets

2009-11-03T03:57:00.000-08:00

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

2009-11-03T03:32:00.001-08:00

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

2009-11-03T03:23:00.000-08:00

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.

2009-10-21T03:32:00.000-07:00

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.
OVERVALUED HOMES
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.

Some signs of recovery ?

2009-10-12T05:04:00.000-07:00

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.................

2009-10-12T05:00:00.000-07:00

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

Lanzarote Property Market Becalmed

2009-07-27T00:06:00.000-07:00

This week we are bringing you a guest posting from Nick at Lanzarote Guidebook. You can check-out their site at http://www.lanzaroteguidebook.com/

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.

25% of UK loans unsuccessful

2009-07-09T01:58:00.000-07:00

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

Lending reluctance

2009-07-07T08:43:00.000-07:00

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
cheers

Spain to legalise 40,000 homes

2009-07-06T08:38:00.000-07:00

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

2009-07-06T08:28:00.000-07:00

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.

cheers

Spanish Tax reforms - my solution

2009-06-23T10:09:00.000-07:00

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

2009-06-23T09:37:00.000-07:00

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

Spanish banks downgraded

2009-06-18T22:32:00.000-07:00

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

2009-06-18T22:19:00.000-07:00

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 ?

Unbelievable

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..........................

You have got to be kidding me

2009-06-12T08:13:00.000-07:00

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?

2009-06-12T08:01:00.000-07:00

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

Body parts to the highest bidder

2009-05-10T13:24:00.000-07:00

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

Why choose interest only for your Spanish mortgage

2009-05-08T12:29:00.000-07:00

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
Unemployment

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.

Unemployment
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.

House prices still falling in UK

2009-05-06T07:01:00.000-07:00

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.

2009-05-06T06:45:00.000-07:00

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.

Bankruptcies on the rise

2009-05-01T09:21:00.000-07:00

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

2009-05-01T09:09:00.000-07:00

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.......

Sorting the Spanish property market

2009-04-30T10:26:00.000-07:00

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

numbers

2009-04-30T10:17:00.000-07:00

Here's a number for you :-

4,000,000

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......

Daylight robbery

2009-04-28T09:23:00.000-07:00

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

Jesus

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

Congestion charge - you couldn't make it up

2009-04-23T07:08:00.000-07:00

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?"

"No"

"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........