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2023 in Review: Non-Resident Mortgage Market Insights

We cannot believe it is December already. Time flies when you’re brokering mortgages – I think that’s how the saying goes, right? As 2023 comes to a close it’s time to reflect on the trends and developments that have shaped the non-resident mortgage market this past year in Spain. We have put together a few main talking points to touch upon here, some key topics and insights into the ever-growing and ever-challenging world of Spanish mortgages.

Mortgage Completions vs 2022

Here at Mortgage Direct we are more or less in line with 2022 for total completions, a very slight increase is forecasted for the end of the year. This means that despite all the macro-economic difficulties we have encountered in Europe and at a global level, the Spanish Real Estate market is maintaining and reinforcing its appeal towards international investors. This seems to  especially be the case for U.S. citizens, who are facing interest rates at their highest level in over 20 years. The average interest rate in the U.S. on the typical 30-year, fixed rate home loan rose to 8% for the first time since 2000 ( Not only attracted by the lure of the Mediterranean lifestyle, the comparable borrowing rates (see below) and Golden Visa options has made Spain the ideal choice for investment for many Americans.

Favorable Interest Rates

Compared with recent years where there were historically low interest rates for an extended period of time, 2023 was always going to be a more difficult year. However, in comparison to other countries around the world, the Spanish non-resident rates available remain extremely competitive. Non-resident buyers find themselves in a favorable lending environment, making Spanish real estate investments even more attractive than elsewhere. At Mortgage Direct, we have been able to secure long-term fixed rates as low as 3.10% for our international clients earning outside of the Euro currency, despite Euribor and swap rates sitting comfortably and consistently above this all year.

Where are people buying and how much are they borrowing?

The most interesting areas for international buyers remain the Balearic Islands (Ibiza, Mallorca, Menorca) and Barcelona, but the entire Costa Blanca is growing in interest with Alicante leading the charge. Costa del Sol on the other hand also remains a recurrent “heaven” for foreign buyers, but a growing interest is being recorded in Madrid and we are expecting more business in the capital looking forward to next year. Despite the number of completed mortgages being relatively in line with last year from a non-resident perspective, the same cannot be said about the average mortgage value. This year’s average mortgage size was around 350.000€, lowering itself with respect to the previous years.

Digital Transformation

Spain still has a lot of catching up to do here, but we are starting to see some really positive changes as financial institutions look to streamline their processes making it more accessible for non-residents. We are starting to see more online applications, virtual document submissions, e-signatures, but many lenders still have a long way to go. This is a conversation we have with all of our international buyers and it is an important one because they are often used to a completely different application process in their home country – an often much faster one. The average application-to-approval can take months when you apply directly at branch level. At Mortgage Direct, we have streamlined our internal processes and we are constantly improving our customer journey and application experience with some more big changes to come over the coming months.

Lending Criteria

Not much to see here. Much of the same criteria applies, with non-resident mortgages capped at 70% loan-to-value, meaning international investors entering the Spanish market will typically need around 42% of the purchase price to cover the down payment, fees and taxes. However, some lenders are beginning to get really creative and, if you have funds you’re willing to invest with your new Spanish bank, it may even be possible to go beyond the 70 mark. Other than tax status, the next most important question we have for our clients is regarding the currency they earn in. At Mortgage Direct, we have access to the full Spanish market, so we are able to find solutions for currencies outside of the Euro, including the Mexican Peso (MXN), Australian Dollar (AUD), Singapore Dollar (SGD) and many others.

Diverse Mortgage Products: 

Lenders responded to the evolving needs of non-resident buyers by introducing diverse mortgage products. Tailored solutions, such as fixed-rate mortgages and hybrid financing options, provided flexibility to match individual financial preferences. We’re starting to see more and more lenders offer long-term fixed rates to customers earning in a foreign currency through Mortgage Direct, which was something much harder to negotiate this time last year. Some banks are getting even more creative, offering more options on their mixed rates, allowing the borrower to fix the rate for three, five or even 10 years.

Looking Ahead to 2024: 

As we turn our gaze toward the future, we predict that the non-resident Spanish mortgage market will remain dynamic. Keeping an eye on emerging trends, regulatory updates, and economic indicators will be essential for those considering property investments in the coming year.  Thank you for being part of our community in 2023. We look forward to bringing you more insights and updates as we embark on a new chapter in the ever-evolving landscape of non-resident Spanish real estate.

Oh yes, of course, Merry Christmas to you all!

Stuart Payne Mortgage Adviser CeMap

Barcelona based, Stuart previously workled as a mortgage adviser at one of the UK's largest brokers where he recommended products and insurance from the whole of the UK market. He holds the regulatory CeMAP qualification and more.

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Mortgages taken out in currencies other than the currency in which you earn are considered Foreign Currency Mortgages. Changes in the exchange rate may therefore increase the equivalent value of your debt. Under the Mortgage Law 5/2019 banks in Spain have introduced mechanisms to protect consumers from exchange-rate risk. For more information, please speak to your broker.

Mortgage Direct, S.L. is a company registered in the Registro de Intermediarios de Crédito Inmobiliario del BdE with the nº D108.

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