When Will Mortgage Lending Stop Declining?

Spanish mortgages lendingSpanish mortgages lending

J.L.M. Campuzano (Spanish Banking Association) | Data on the Spanish property market reveals the same trend as over the last few months: a moderate recovery in prices, at the same time as sales continue (adjusted for the 2016/2017 calendar difference with respect to Holy Week)

And figures which confirm how culturally important owning their own home is for Spanish families, a substantial part of which is financed with mortgages. The latter point is very relevant, given that it highlights an important difference compared with the situation prior to the origin of the crisis when the number of mortgages exceeded that of purchase-sales.

 

According to a recent report by Moodys published in the media, the ratios of home sales now are healthier than those observed before the crisis. The caution demonstrated by the banks when it comes to granting mortgages (now four times gross salary and more than double in 2006 or the fact that only 14% excedes 80% of the appraisal value), added to the strong adjustment in prices and the relative low level of transactions.

There are some interesting graphics in the Mortgage Association’s latest bulletin, like that of mortage lending as part of GDP, which shows the mortgage bubble is deflating: the Spanish economy has gone from having over one billion euros in mortgage loans as a percentage of GDP in 2009, at the height of the economic crisis – more than 100% – to 59.29% in December 2016.

The Spanish economy has stopped refinancing loans for over 400 billion euros in mortgages. So there is margin for continuing to refinance without fearing any bubble.