Anyone who has lived in Spain for a few years will remember the heady days when you waltzed in to any well known Spanish bank and said “I am thinking of buying property, can I have a mortgage” answer was always
SPANISH MORTGAGE MARKET CHERRY PICKS DEAD CERTS

The Spanish mortgage market has been up and down like a proverbial fiddler´s elbow over the past few years but news came to me yesterday which makes me think that buying property is not at the top of most bank´s wish list when looking for new business.

Anyone who has lived in Spain for a few years will remember the heady days when you waltzed in to any well known Spanish bank and said “I am thinking of buying property, can I have a mortgage” answer was always “how much do you want”.  The required papers for the transaction were minimal and so long as you had one head and two eyes equidistantly placed you were guaranteed the deal would be done and dusted within 4 weeks.  Not only would they lend you whatever you wanted, they actively engaged in foisting more money on to you than you needed.  I had a very interesting conversation with my bank managed when I decided to buy an apartment in Cadiz City.  He said “how much do you want” I told him and he looked almost hurt.  He said “but that is only 80% of the price of the house and the taxes, don´t you want more”  I said “what for, I am only buying property in Cadiz City not half of the Costa de la Luz” and he said, “don´t you fancy a holiday or a new car or something”.

Sadly it would appear that a bank manager  of the breed who not only wanted to finance your house purchase, your social life and your outward displays of affluence  is a breed unlikely to be seen again in the near future.  If you can remember far enough back,  before the world crashed into the financial abyss it now appears to be languishing in, I am taking about the days when you changed your car like your underwear and competed with a Times travel columnist to have more holidays than any of your friends and associates in the same year.  Buying property was a run of the mill event, you looked for a house, you got a mortgage, you worked to pay it – job done.  Apparently it does  not work like that now there is a whole under current of banks sculpting the home owner market to what gives them greatest security not what sells houses and puts decent ordinary people on the home owner ladder.

Life has hit the hard bed rock of reality and when that happens it is the little people who tend to get squished.  I had a couple of clients the other day.  Young Spanish couple, two kids under 5 years old, they have been in rented accommodation and living with their parents since they got married and have managed to save up the deposit for their first family home.  Now normally people start house hunting before they go to the bank.  Not these sharp cookies, they spoke to their bank 5 weeks ago to suss out what the monthly  repayments would be and therefore what they could afford to spend.  They showed all their personal papers and were told how much the bank would loan them based on their income.  They went house hunting and found a nice little property on our website.  Back they went to the bank to make the arrangements,  only to be told that the bank could still give them the mortgage but not at the rate they had offered 5 weeks ago.  The new rate was so much higher that they would not have been able to make the repayments.

They phoned me to ask what they could do,  so I told them to go along the road to another bank who have always been good with our clients.  They called half an hour later to say that the rate offered was much better but because they were not existing clients the bank would only give them 80% of the house purchase price without the taxes.  Effectively they had to put in 20% of the house price plus another 10/12% on top to pay the tax.

How many young couples do you know who have 31/32% of their first house purchase put by and  ready to go.  If that had been the case when I bought my first property I would still be living with my parents.  I remember my fiancé and I  foregoing a holiday, nights out and new clothes plus putting all our bonuses and spare cash away for a year to get 5% together.

The whole thing rang alarm bells.  So I trotted off for a coffee with my friend from the bank to see what the inside story was.  “Well” he said, “the banks don´t want to lend on property due to the downturn.   They are designing the mortgage packages to cherry pick prime clients.  They want to ensure the deal is low risk and the clients have a good lump of their cash in the pot to prevent any chance of defaulting on the loan and leaving the bank with a house in negative equity.  At one time you were guaranteed 80/90% of the valuation of the property.    Now they will only give you 80% of the actual purchase price no matter whether it surveys way over the asking price and no lending to cover taxes”.  So it would appear that your average high street Spanish banks are purveyors of umbrellas so long as it is not raining but when the droplets start to fall – forget it.

So much for the Government´s  instructions to the banks that they must recommence mortgage lending.  They obviously forgot to add “but not at rates and with conditions which cut out all but the most prime borrowers”.  So if you are anywhere between 18 and 30 and do not have a pot of money then forget it and keep lodging with your mum, at least she will do your washing and you can be assured of a hot meal when you get home from work …….. it sounds pretty idyllic actually.