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Over 11 Mn Spanish Households Ineligible For Cheap Mortgages

1/10/2014 – El Mundo

The income requirements for being eligible for a mortgage loan close the door to 11.3 million of families in Spain. Allegedly cheap credits demand €2.300 on average to be earned monthly by a household.

The data has been drawn by comparator company kelisto.es. In the further part of the report one learns that almost 75% of these households (8.33 million) does not earn enough to apply for one of the mortgages offered by 10 biggest banks in the country whose income requirements average at minimum €1.549 per month.

Year-to-date, new mortgage approvals posts around 18.000 monthly, meaning a 85% fall if compared to the May 2007 peak, just before the rel estate bubble burst, when 116.550 loans were granted. The numbers go along with decline in average amount lent, driven by depreciation in housing prices.

Thus, while a regular mortgage approved in May 2007 showed €150.810, those in 2014 shrink by one third to €99.164.

Estefania Gonzales, speakswoman of the Personal Finance department at kelisto.es, points out that many Spanish entities launched low-interest mortgage offers. ‘The problem is that not only presently banks apply higher interest rates than before the recession (ranging from 1.65% to 1.89%) but also demand purchase of additional products and a considerable income’, she says.

Cheap Mortgage? Yes, On Condition That…

Kelisto.es’s analysts indicate that out of the top 10 most economical mortgages in the market, five of them establish an income floor ensuring access to the attractive conditions. Precisely, they require €2.300 earned monthly. About 11.3 million Spanish families earn less than €2.000 and those which earn between €2.001 and €2.299 have not been included in the official statistics but they should be counted as well.

Other economical loans of large banks require a minimum income of €1.549,06 monthly, keeping away another 8.43 million families that earn less than €1.500. The most demanding mortgage is the Prestamo Hipotecario of Banco Popular which sets up floor differential at 2.25%.

The market also offers loans for home purchase said to be adapted to current circumstances and situation of Spanish households. However, their interest rates exceed Euribor by 2.21%.

Mortgages ‘For Everybody’ But With Worse Conditions

The inconvenience of the mortgages ‘for everyone’ rests in the fact that their conditions are generally less attractive than the best offers in the market. On average, these loans apply an interest cap of 2.98% (the economical: 2.60%) and a floor of 2.21% (1.80%).

The report by kelisto.es concludes that the present mortgage offer sentences lower-income families to paying more expensive loans. In practice, if a household files for a Spain average mortgage (i.e. €99.164 for 21 years), they would have to pay 520.92 euros monthly, totalling at 6.251,04 euros per year.

In turn, if someone is eligible for one of the cheap loans, they will have to pay €500.87 monthly and €6.010,44 annually. This means that a customer with smaller income would have to spend €240 more (4%) for their mortgage.

 

Original article: El Mundo

Translation: AURA REE