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Brexit, Spanish Mortgage Market review and a look ahead to 2020

As I write this, the UK is reacting to a sweeping Conservative victory. It seems Brexit might happen after all! So what does it mean for the Spanish mortgage market?

Leaving the ‘B’ word to one side for the time being, as we reach the end of a turbulent 12 months it’s time to reflect on 2019 and what might happen in 2020.

From a mortgage perspective, it’s been a landmark year in the Spanish property market. It’s been difficult, and property sales have dropped. Many have put this down to political uncertainty and weak exchange rates for foreign buyers but there are other factors to consider.

During 2019 the whole market, including banks, estate agents, ourselves as financial intermediaries and of course property buyers have had to adapt to the new mortgage legislation in Spain otherwise known as the infamous ‘ley hipotecaria’.

Although it was expected, with the implementation of the EU’s Mortgage Credit Directive having been delayed since 2016, the legislation was hurried through in Spain and it paralysed the market for non-resident buyers for at least 2 months. Banks struggled to understand its implications, not only for those clients earning in non-Euro currencies but for the property buying process as a whole. The market was tough but I’m proud of the way that the team at Mortgage Direct tackled the situation head on and as a result, we are far better positioned than our peers.

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.

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Despite the political uncertainties we have not only seen some of the highest levels of enquiries since we established in 2006 but 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% when taking into account 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. As banks get used to the regulations during 2020, we expect banks to reinstate more products for non-residents, especially their very popular fixed rate products that were withdrawn as a result of the legislation. We also expect banks to be more open to clients with non-Euro incomes. Perhaps they will also begin to look at equity release/re-mortgage products again, a trend we were beginning to see before the introduction of the new legislation.

Expectations for Euribor are that it will remain negative for some years to come and we hope that this, combined with a difficult 2019 will drive competition between lenders and keep mortgage rates down, attracting foreign buyers and investors to the market.

Agreed, Brexit will continue to provide some challenges as the UK government looks to push it through early in the new year but as a company, we look at 2020 with optimistic eyes. We have more collaborators trusting in our services than ever, for which we are very grateful. We also have ay well-qualified team of professional advisors, a client base from all over the world and a fantastic product range at our disposal.

Here’s to a fantastic 2020 and we take this opportunity to wish all our clients, collaborators and service partners a very happy Christmas and a successful 2020.

Katherine Walkerdine Founding Partner / Business Developer BA (Hons),Cert PFS,Cert CII (MP)

Living in Spain since founding Mortgage Direct in 2006. Prior to that, she had her own practice in London for fifteen years advising high-net-worth clients on their investment and taxation planning. An array of UK and Spanish qualifications.

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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