Tag: variable rate mortgage

Tecnocasa: Second-Hand House Prices Rose By 8% In H1

7 September 2016 – El Mundo

The average price of second-hand housing in Spain rose by 7.99% YoY during the first half of 2016, to €1,666/sqm, according to the XIII Report about the residential market, prepared by Tecnocasa and the University of Pompeu Fabra (UPF) using sale/purchase and mortgage data from the real estate company.

Despite the significant increase, this average price is still well below the maximum values that the market reached at the end of 2006 and the beginning of 2007, when the average cost per square metre of second-hand homes amounted to more than €3,500. (…).

The city of Barcelona, which saw a price rise of 9.45%, led the increases during the first half of 2016, followed by Málaga (9.21%) and Madrid (9.03%). In this way, the cost per square metre rose to €2,443/sqm in Barcelona, to €1,044/sqm in Málaga and to €1,835 in Madrid.

In this regard, Tecnocasa notes that “we are seeing a two-speed recovery”, given that prices in cities such as Guadalajara, Sevilla, Zaragoza and Valencia increased by less than 2% (during the same period).

At a press conference held to present the report, the Director of the Department for Analysis and Reports at the Tecnocasa Group, Lázaro Cubero, explained that rental prices are also increasing, in the same proportion, and the average mortgage is also rising (€91,808), which represents an increase of 9.8%, although still represent less than half the lending figures in 2007 (€185,462). In this sense, it is worth remembering that the average monthly repayment amounts to €367.

Cubero stated that prices are still “attractive” – they are 52% lower than they were in 2006 for Spain as a whole – and financing conditions are very favourable, thanks to low interest rates, at a time when vendors are still having to apply discounts to their initial asking prices to achieve a sale.

The CEO of the Tecnocasa Group, Paolo Boarini, indicated that financial institutions are still behaving in a conservative way when it comes to granting mortgages: they are granting 73% of the appraisal value, and “it is very hard for people with temporary contracts to obtain a mortgage; self-employed people also face challenges”.

Meanwhile, for the Professor of Economics at the UPF and the coordinator of the report, José García Montalvo, the increase in the uptake of fixed-rate mortgages is “a significant change in the right direction”. He criticised Spain in this regard, stating that variable rate mortgages do not account for 95% of the total market in any other country, given that this means all of the risk in terms of interest rate fluctuations is transferred to the client. (…).

On the other hand, the Tecnocasa Group brokered 4,327 house sales in Spain during the first half of the year, up by 22% compared with the same period in 2015, as well as 1,445 mortgages, up by 28%, through its network of 465 offices (19.23%) and 2,000 sales agents. (…).

Original story: El Mundo

Translation: Carmel Drake

INE: Fixed Rate Mortgages Enjoy Unparalleled Popularity

29 July 2016 – Cinco Días

The mortgage market is not only on track to recovery, it is proving unstoppable. The enormous and increasingly attractive mortgages being offered by the banks to secure new clients are encouraging homebuyers. And that is being reflected in the figures. According to the property registers, the signing of new mortgages for the acquisition of a home recorded a significant YoY increase of 34.1% in May, to reach 26,579 contracts, an increase that was ten basis points higher than the rise recorded in April (24.6%) and twenty points higher than the increase in March. With the YoY rise in May, mortgages recorded 24 consecutive months of increases.

And the data reveal another important fact to keep in mind. It seems that the firm commitment of the financial institutions to fixed rate mortgages is working, with increasingly more clients choosing that option. 80.4% of the mortgages constituted in May had variable rates, compared with 19.6% that had fixed rates. Just a month before, in April, variable rate mortgages accounted for 85.2% of the total, whilst fixed rate mortgages represented 14.8%. But the increase in fixed-rate loans is unquestionable if we compare the latest figures with those from just a year ago. In May 2015, when 19,732 new mortgages were constituted, 92.8% of them were variable rate and 7.2% were fixed rate. In other words, the proportion of new fixed rate mortgages has almost tripled in one year.

And, in recent months, the financial institutions have shown a greater predilection for fixed-rate mortgages, given the low interest rate environment in which they are operating. And, what’s more, the battle to win clients is still very much alive and kicking, with some entities now offering interest rates of less than 2%. There are several examples: BBVA is offering 15-year fixed rate mortgages at 1.90%. Bankinter is offering 1.80% on its 15-year mortgages and 1.60% on its 10-year products. Meanwhile, Activobank’s promotional mortgage to celebrate its anniversary establishes a rate of just 1.50% over 10 years. (…).

With just two days left of trading before the end of July, the average Euribor rate currently sits at -0.057%, compared with -0.028% in June. Thus, the decrease in Euribor has doubled in just a month. (…).

According to the provisional data for May, provided by INE yesterday, which comes from public deeds signed in the previous months, the 26,579 mortgages that were constituted during the month represent an increase of 12.6% compared with the 23,607 signed a month earlier.

The value of those mortgages amounted to €2,776.9 million, up by 33.1% compared to a year ago and 8.6% higher than in April. The average mortgage loan amounted to €104,480, which represents a reduction of 0.8% compared to May 2015 and 3.6% compared to a month earlier. (…).

Original story: Cinco Días (by M. Calavia)

Translation: Carmel Drake

Sabadell Enters Mortgage War With 20-Yr 3.7% Fixed Rate Offer

16 January 2015 – Expansión

NEW PLAYER / The bank led by Josep Oliu breaks into the mortgage market with a fixed rate loan, as it seeks to revitalise these kinds of operation, which currently have little prevalence.

The war for new mortgages, unleashed on the domestic market in recent weeks, has a new player: Banco Sabadell has decided to enter the fray to increase its market share of new business. And, in addition to offering a competitive variable rate product, it is also inviting customers to take out mortgages with rates that are fixed over the life of the loan, under terms clearly undercut those currently offered by other banks.

The entity led by Josep Oliu finally approved the launch of a fixed rate mortgage product a few days ago; the rate varies depending on the term of the loan. It begins at 3.5% for loans with a 15-year repayment period and increases up to 3.95% for 30-year operations. In between, a rate of 3.7% will apply for 20-year loans and 3.9% for 25-year terms. An arrangement fee of 1% will apply to all loans and their approval will require borrowers to register their payroll and take out a life insurance policy with the entity.

Better conditions

These conditions compare favourably to those offered by other entities, such as Bankinter (4.94% over 15 years), Caixabank (between 5.5% and 6.95% for operations over 25 years) and Kutxabank (3.98% over 20 years). The arrangement fees vary in each case, but all of the entities require borrowers to register their payroll and take out insurance.

The supply of fixed rate mortgages is currently very limited because entities consider that the interest rate risk that they face over the medium-long term is excessive.

But Management at Sabadell believe that low interest rates are going to be with us for some time to come and that in any case, it does not seem that inflationary pressures are going to lead to an excessive increase in the price of money any time soon. As a result, they believe that they can offer fixed rates for the time being, provided those rates reflect the terms of the loans. Such products may be attractive for those wishing to purchase a home since they guarantee the mortgage repayment amount for the whole life of the loan.

Sabadell is not going to market this type of mortgage exclusively; it wants to enter the wider battle for new mortgages (both fixed- and variable-rate) and intends to engage the tennis player Rafa Nadal, with whom the entity has a marketing contract, as a lure to get closer to its customers. This will be the first campaign in which Nadal participates after signing a contract with the entity last year.

The bank has not set a specific target for its fixed-rate mortgages, but it has fixed an internal goal for the signing of new operations: it wants to achieve growth of 40% on its 2014 figures. In absolute terms, that may not represent a very significant number (the bank has not published its results from last year yet) given that the starting point is relatively low. But it is important qualitatively, since it implies that the bank believes that mortgages are making a come back.

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake