Banks 'more willing' to offer 100% mortgages this year

BANKS in Spain are at last relaxing their loan-to-value criteria and becoming more prepared to offer 100% mortgages, according to brokers.

In the past few years, the few lenders which were willing to provide home loans would only offer between 50% and 60% of either the purchase price or the value of the property based upon their own surveys - whichever was the lower.

Now, 80% mortgages are becoming more common and intermediaries predict that 100% loan-to-value (LTV) finance is set to become a regular feature over the course of this year.

Whilst banks acknowledge that property prices have fallen, they recognise that buyers' salaries have also dropped, as has their take-home pay due to higher taxes, and that very few of them have any savings to enable them to put down deposits of between 20% and 50% of the home value to enable them to make a purchase.

Those willing to lend the full purchase price will still, however, expect customers to pay the fees involved in cash - a figure typically reaching 10% of the market value.

But banks are beginning to see that in order to achieve their mortgage sales targets, they need to look at the terms and conditions of the loan contract and not just the price of the property to be purchased, says a leading broker.

Low interest rates and cheap property prices alone will not help banks reach their full quota, meaning they are finding it necessary to offer higher LTVs.

According to Spain's National Statistics Institute (INE), the number of new mortgages taken out in November - the latest for which figures are available - went up by 14.2%, having risen for the previous six consecutive months - albeit gradually losing ground with each passing month.

New mortgages rose by 18% in October and 29.8% in September.

A total of 15,900 new home loans were signed up for in November, 10.1% fewer than in October when 17,687 were taken out.

With the Euribor, or Eurozone interest rate having plunged to historical lows, mortgages have been consistently going down for the past four or five years at least.

A typical €95,000 home loan over 35 years taken out at the end of 2007 would have cost in region of €500 a month, but by the end of 2014 would have fallen to just over €290.