As I write this, the UK is reacting to a sweeping Conservative victory, signaling that Brexit might finally happen. So, what does this mean for the Spanish mortgage market?
Reflecting on 2019
Leaving Brexit aside for a moment, it’s time to reflect on a turbulent 2019 and anticipate what might happen in 2020. From a mortgage perspective, it’s been a landmark year in the Spanish property market. Property sales have dropped, which many attribute to political uncertainty and weak exchange rates for foreign buyers. However, there are other factors to consider.
The entire market—including banks, estate agents, financial intermediaries like us, and property buyers—had to adapt to new mortgage legislation in Spain, known as the ‘ley hipotecaria’. This legislation was expected, as the EU’s Mortgage Credit Directive had been delayed since 2016. However, its hurried implementation in Spain paralyzed the market for non-resident buyers for at least two months. Banks struggled to understand its implications, especially for clients earning in non-Euro currencies and the overall property buying process. Despite these challenges, our team at Mortgage Direct tackled the situation head-on and positioned ourselves better than our peers.
Impact of new legislation
We hope the new legislation will enhance consumer protection, provide better clarity of mortgage conditions, and offer more control over compulsory products that Spanish banks often insist on when taking out a mortgage. Despite political uncertainties, we have seen some of the highest levels of inquiries since our establishment in 2006. We are also able to offer some of the best mortgage conditions, with fixed rates as low as 1.65% over 25 years and variable rates below 1%, considering the negative Euribor (the reference base rate used to quote mortgages in Spain).
We hope the new legislation will lead to enhanced consumer protection, better clarity of mortgage conditions and more control over compulsory products that Spanish banks often insist on when taking out a mortgage.
Looking ahead to 2020
As banks become more accustomed to the regulations during 2020, we expect them to reinstate more products for non-residents, especially the very popular fixed-rate products that were withdrawn due to the legislation. We also anticipate banks becoming more open to clients with non-Euro incomes. Additionally, they might begin to consider equity release/re-mortgage products again, a trend we saw emerging before the new legislation.
Expectations for Euribor are that it will remain negative for some years, which, combined with a challenging 2019, should drive competition between lenders and keep mortgage rates low. This will likely attract foreign buyers and investors to the market.
The Brexit challenge
Brexit will continue to present challenges as the UK government aims to push it through early in the new year. However, we look at 2020 with optimism. We have more collaborators trusting in our services than ever, for which we are very grateful. Our well-qualified team of professional advisors, a diverse client base from around the world, and a fantastic product range are all at our disposal.
Here’s to a fantastic 2020. We wish all our clients, collaborators, and service partners a very happy Christmas and a successful New Year.