Banks offering pre-crisis terms on Spanish properties

According to a recent newspaper article, Spain’s main banks are once again offering mortgage loans on the same terms as they did before the crisis in an effort to shift their backlog of properties, many of which were seized during that period.

The report said that some banks, such as Banco Santander, BBVA and Caja Madrid, are even offering 100% mortgages over 40 years, which are the same terms which were being offered before the outset of the crisis.

Some savings banks, such as La Caixa, CAM and Bancaja, are also offering 100% mortgages over 30 or 40 years.

The Bank of Spain figures show that loans exceeding 80% of a home’s value accounted for 11.9% of total loans in 2010, representing a level similar to that of 2008, and around 50,000 of all mortgages granted.

Analysts have interpreted the fact that banks are willing to issue loans they would have trouble selling on as a sign of the pressure some institutions are under to remove direct exposure to homes on their balance sheets.

Families Spend 27.3% of their Income Buying a Home
Spanish families who purchased a home in the first quarter of the year spent 27.3% of their annual gross income on the purchase (counting tax incentives). This figure represents one tenth less than the same period of 2010 and more than seven points less than in 2009, according to latest figures published by the Bank of Spain.

From January 2011, the Government limited tax incentives for the purchase of housing to incomes lower than 17,707.20 euros gross per year and phased them out progressively up to a threshold of 24,107.20 euros gross annually.
However, the Bank of Spain reported that this measure does not affect family aid because, while the average total household income exceeds 24,107.20 euros, estimated respondent income is currently below 17,707.20 euros and it is only when that upper limit is reached that the tax change will have an effect on family aid.

Another interesting fact the Bank of Spain notes is that families who bought a home in the first three months of the year will require 6.5 years of gross income to pay for their apartment or house compared to a peak of 7.6 years which were needed between 2006 and 2007.


Leave a Reply