Mortgages & Euribor

The latest Spanish mortgage and Euribor news

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell to 1.37pc in April, 34pc lower than the same time last year.

As a result, repayments on a typical 25-year, €150,000-mortgage resetting now will go down by around €50/month or €600/year.

But cheaper borrowing costs only apply to those who already have mortgages. New lending collapsed 47pc in February, the 22nd consecutive month of falls, according to the NIE. Increasingly, the only buyers in the market are cash buyers.

The latest Spanish mortgage and Euribor news

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell to 1.37pc in April, 34pc lower than the same time last year.

As a result, repayments on a typical 25-year, €150,000-mortgage resetting now will go down by around €50/month or €600/year.

But cheaper borrowing costs only apply to those who already have mortgages. New lending collapsed 47pc in February, the 22nd consecutive month of falls, according to the NIE. Increasingly, the only buyers in the market are cash buyers.

A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell to 1.45pc in March, leaving it 25pc lower than the same time last year. That’s a big fall.

As a result, repayments on a typical 25-year, €120,000-mortgage resetting now will go down by around €25/month or €300/year.

Mortgage rates are plunging because of the new policy by the European Central Bank (ECB) to provide banks with unlimited funding for 3 years.

The following chart shows Euribor over a decade.

Credit Crunch II

None of this means cheap credit for mortgage borrowers. Quite the opposite: When banks can only get short-term (3-year) financing, they avoid lending to house-buyers for 25 years.

Partly as a consequence, new mortgage lending in Spain has collapsed, down in January an annualised 41pc by volume, and 47pc by value, with the average mortgage value down 10pc, as illustrated in the charts below. It’s clear Spain is back in a credit crunch.

So mortgage rates have plunged, but so has new lending. The result is less money available to buy housing, which means downward pressure on prices (in the average).

A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate typically used to calculate mortgage repayments in Spain, fell to 1.678pc in February, leaving it 2.1pc lower than the same time last year.

This is the first time that annualised Euribor has turned negative in 19 months. As a result, repayments on the average 25-year, €150,000-mortgage resetting now will go down by around €36/year.

This time last year Euribor was still rising fast as the European Central Bank (ECB) tightened monetary conditions. But Euribor has been on a downward trend since August last year and shows no sign of changing direction, as you can see from the chart above.

Rates will stay low whilst the ECB keeps up it’s unlimited lending policy, giving banks 3-year financing in return for dubious collateral.

Unfortunately, this does not mean cheap credit for mortgage borrowers. Quite the opposite. When banks can only get short-term (3-year) financing, they avoid lending to house-buyers for 25 years. Partly as a consequence, new mortgage lending in Spain has collapsed (see chart below), down 32.6pc in 2011 (to 409,337) – the biggest annual fall since the crisis began – according to figures from the National Statistics Institute (INE).

The overall value of new mortgage lending fell 35.5pc to €45.8 billion, and the average mortgage loan fell 4.3pc to €111,950, at an average interest rate of 4.35pc, up 11.54pc on 2010.

A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate typically used to calculate mortgage repayments in Spain, fell to 1.837pc in January, a percentage change of -8.6pc on a monthly basis, but +18.5pc on an annualised basis.

As a result, repayments for the average €150,000-mortgage resetting now will go up by around €240/year.

Analysts expect Euribor to remain stead or fall slightly for the rest of the year, in line with the ECB’s 1pc interest rates.

New mortgage lending slumps again

Low interest rates sound like good news for borrowers, but only if they can get a mortgage. Unfortunately, it’s never been harder to get a mortgage in Spain, as the chart below shows. The number of new mortgages signed collapsed an annualised 35.8pc to 28,113 in November, just a fraction above September’s contemporary low.

A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate typically used to calculate mortgage repayments in Spain, fell for the forth month in a row to end the year at 2.01, a percentage fall of 1.7pc on the previous month.

Compared to the 12 months ago, however, Euribor rose by 33.4pc, meaning higher mortgage repayments for all those on annually resetting mortgages.

Base rates cut

The European Central Bank (ECB) cut base rates from 1.25 to 1.00 during December, the second cut in 2 months since the Italian Mario Draghi took over as the new Governor. Markets were expecting the cut, and judging by Euribor’s recent trend do not expect rates to increase any time soon. As you can see from the following chart, Eurozone base rates are still significantly higher then the US, the UK, and Japan.

New motgage lending continues shrinking

New mortgage lending continued to shrink in October, with new mortgage approvals down 43pc to 23,193 (and down 46.5pc by value), according to figures from the INE. It’s clear the credit crunch is well and truly back in Spain, as you can see from the following chart showing the annualised change in new mortgage approvals.

A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell for the third month in a row to 2.044pc in November, a percentage fall of -3.1pc on the previous month.

The graph above makes clear that, after rising abruptly in the first quarter of the year, Euribor has been stable or declining since May in expectation of a cut in the base rate.

Mario Draghi, the new Governor of the European Central Bank (ECB), announced a cut in base rates of a quarter of a point to 1.25% just a few days after taking over from Trichet at the beginning of November. In the face of alarming economic headwinds, markets expect the ECB to cut the base rate even further, hence the fall in Euribor.

Euribor down, mortgage payments up

The fall in Euribor will not be much immediate comfort for those with an annually resetting mortgage. Euribor is now 33pc higher than it was 12 months ago, meaning repayments on the average mortgage will rise by 400 Euros/year.

New motgage lending collapses

The Credit Crunch is back in Spain with a vengeance. New mortgage lending fell 42pc in September year-on-year (to 30,808), and the average value fell 6pc to €111,934, according to figures from the Statistics Institute (INE). Lower mortgage lending = less money chasing homes > downward pressure on prices and more bad news for vendors.

A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell for the second month in a row to 2.067pc in September, a percentage fall of -1.4pc on the previous month.

As you can see from the graph above, the rise of Euribor seems to have topped out, at least for the time being. With markets still fretting about a European debt crisis, expectations of rising interest rates have fallen, taking the heat off Euribor rates. The European Central Bank has said it has no plans to raise (or cut) the base-rate any further. It now stands at 1.5pc.

And the monthly fall will not be much comfort for those with an annually resetting mortgage. Euribor is now 45.6pc higher than it was 12 months ago, meaning repayments on the average mortgage will rise by 480 Euros/year. The following chart shows how Euribor has changed on an annualised basis.

The next chart tells the story of Euribor over 10 years. It was way too low between 2002 and 2006, sparking off an insane boom in Spanish real estate. It rose in 2007-2008 as other European economies and inflation started to grow too fast , but was slashed in 2009 to head of a depression. It made a feeble attempt to rise again this year, but that has run out of steam with the economy. It is now back around 2pc – way below what it should be in normal times. I guess it will stay like this for some time.

New motgage lending falls

But right now theproblem is not so much the Euribor rate, which is historically low; it is that banks don’t seem to want to lend at any rate, starving the housing market of credit without which it cannot recover.

New mortgage lending fell 47pc in July (to 29,523) compared to the same month last year, the lowest level recorded since this data series started in 2003.

The average residential mortgage value was €110,604, 9pc down on last year.

All of which means less money around to fuel demand for Spanish property, putting further downward pressure on prices.

Negative equity is back with a vengeance as property prices plummet, finds a new study by consultants Oliver Wyman.

The number of Spanish homes that are worth less than their mortgages has more than doubled in the last 2 years to at least 250,000, finds a new study.

Anyone who bought in 2007 or later with a LTV of 80pc is now likely to be in negative equity, as property prises have slumped 20pc or more since the 2007 peak.

2 years ago, as Spain’s property boom turned to bust, the number of underwater mortgages was already at 100,000. Since then, house prices have done nothing but fall, forcing another 150,000 Spanish home owners into negative equity.

In Spain, unlike the USA, borrowers in negative equity cannot simply hand over the keys to the bank and walk away from their debts. Lenders can pursue borrowers for as long as it takes to get repaid in full, and can add on penalty charges for late payment that significantly increase the cost of the loan.

And foreign borrowers cannot expect favourable treatment: In theory, Spanish lenders can go after the UK assets of British borrowers in default through British courts.

+ Spanish Mortgage Guide

A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell a fraction to 2.097pc in August, a percentage fall of -3.9pc on the previous month.

As you can see from the graph above, the rise of Euribor seems to have peaked, at least for the time being. With markets fretting about a European debt crisis, expectations of rising interest rates have fallen, taking the heat off Euribor rates.

On an annualised basis, however, Euribor is still 48pc higher than it was a year ago, meaning higher monthly repayments for borrowers with variable-rate mortgages.

Repayments for a typical mortgage (150,000 Euros, 25 years) will go up by around 48 Euros /month, or 582 Euros / year, bad news for many a stretched household budget in Spain.

New mortgage lending continues its collapse

New mortgage lending collapsed 42pc in June (to 32,680 new mortgage approvals) compared to a year before, the 14th consecutive month of annualised falls, and one of the lowest levels on record.

The average new mortgage value signed in June was 109,431 Euros, down 8pc compared to June last year, with an average interest rate of 4.12pc, up 4.8pc on last year.

All of which means less money around to fuel demand for Spanish property, putting further downward pressure on prices.

A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, rose to 2.183pc in July, a percentage change of +1.8pc on the previous month.

On an annualised basis, Euribor is now 59pc higher than it was a year ago, meaning higher monthly repayments for borrowers with variable-rate mortgages.

Repayments for a typical mortgage (150,000 Euros, 25 years) will go up by around 60 Euros /month, or 700 Euros / year, bad news for many a stretched household budget in Spain.

Mortgage lending tanks

New mortgage lending rose 20pc in May, but was still 32pc lower than a year before, as you can see from the following charts:

And overall mortgage lending is declining at a rate never seen before, or at least not sine records began in 1992. You can see how 2011 has evolved in red, a far cry from 2008 in blue.

A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell a fraction to 2.144pc in June, a percentage change of just -0.1pc on the previous month.

But on an annualised basis, Euribor is now 67pc higher than it was a year ago, meaning higher monthly repayments for borrowers with mortgages resetting now.

Repayments for a typical mortgage (150,000 Euros, 25 years) will go up by around 61 Euros /month, or 741 Euros / year. That will punish many a stretched household budget in Spain.

Other mortgage news

New mortgage registrations dived an astonishing 38pc YOY in April to 31,358,, according to the National Institute of Statistics (INE). The average mortgage value fell by 3.8pc. That came on top of a 20pc fall in March.

As you can see from the following chart, new mortgage lending is at all-time lows, which is bad news for the housing market.

A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, rose to 2.147pc in May, the highest it has been since January 2009.

On an annualised basis, Euribor is 72pc higher than it was a year ago, meaning higher monthly repayments for borrowers with mortgages resetting now.

Repayments for a typical mortgage (150,000 Euros, 25 years, Euribor +0.25) will go up by around 64 Euros /month, or 775 Euros / year. That will punish many a stretched household budget in Spain.

Other mortgage news

New mortgage registrations collapsed 20pc YOY in March to 43,176, according to the National Institute of Statistics (INE). The average mortgage value fell by 3.8pc.

Overall new mortgage lending fell 20pc to 4.8 billion Euros.

Some experts are saying that the only way out of this mess is a further reduction in house prices.