#bcnmortgages

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February 2016 Euribor

How the Euribor Effects Barcelona Property Market

Over the course of a year the value of the Euribor has been steadily dropping. It has gone from 0.255% in February 2015 to -0.008% in February 2016. This dramatic drop has not happened suddenly; the fall has happened gradually with barely noticeable declines each month. However the rate turned negative for the first time in history this February. European banks have never had to contend with this situation before. The Euribor is the Eurozone’s mortgage base rate. The rate is used to calculate the mortgage repayments in Spain.

In the short term the low Euribor will be adventurous for some borrowers but in the long run this could cause problems in the market. At the moment existing borrowers with an annual resetting mortgage and no floor clause will see their monthly mortgage repayments drop. They may drop as much as 14€ a month for a €120,000 mortgage loan payable over the course of 20 years. However in the long run the low Euribor could bring instability and even calamity. Negative interest rates are obviously not good news for the banks. In the past bankers have had to contend with Euribor rates of less than 1% (like in June 2012) but they have also experienced highs of 5.393% (like in July 2008). Before Spain joined the Euro interest rates were often above 10%.

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PAH Barcelona

The Platform for People Affected by Mortgages (PAH)

The PAH is very concerned with the ongoing eviction crisis in Barcelona where home owners can be evicted for not meeting their mortgage commitments to the bank. The situation has improved dramatically since the election last year of the new Barcelona Mayor Ada Colau a former anti-eviction activist herself. However the PAH is now focusing on keeping this issue in the public eye.

PAH states that not only is the situation critical but housing in general is an issue which needs to be addressed in Barcelona as more and more Spanish home owners are renting out their properties to tourists rather than locals. This leaves many locals desperately looking for available and reasonably priced rental apartments. Spanish home owners in Barcelona know that with the thriving tourism industry in Barcelona they can easily put their rents up for visiting tourists. However when they try to ask the same high rents from locals, the locals can’t pay. A spokesman for PAH, Santi Mas de Xaxas Faus summed it up in a December 2015 interview when he said that the people of Barcelona are facing two crisis: One is the short term (and often illegal) rental of Barcelona apartments to tourists and the other is the problem faced by many Spanish homeowners who cannot repay their mortgages and so get evicted.

Catalonian Independence and the Barcelona Housing Situation

Many Catalonian citizens would like to see Catalonia break away from Spain and become an independent state. One of the reasons being that they would hope to establish a new type of society where, there would be a more socially-oriented society with housing, health care and education as well as other basic needs free or almost free to everyone and where everyone is equal. However whether this would change the present housing situation is doubtful. Tourists would still flock to Barcelona and need accommodation and homeowners would still need to pay their mortgages.

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Spanish Mortgages

Easier, Cheaper Mortgages in Barcelona

The price of houses in Barcelona and Spain in general are slowly rising and the market seems to be recovering from the long slump it experienced since the property bubble burst in 2007. One of the reasons for the rising property prices is that Spanish mortgages are now cheaper and easier to obtain. The number of new residential mortgages completed in Spain has been steadily rising. Where as in April 2015 12,716 new residential mortgages were completed in Spain, in July 2015 the figure was 17,450; this marks a 27% increase when compared to July 2014. This took the number of property sales involving mortgage financing in Spain to 46%; the highest percentage since the property boom years prior to 2007.

Over the course of the last year (from July 2014 to July 2015) there have been a few unexpected peaks in the number of mortgages. For example in December 2014 there were 17,476 new residential mortgages completed, the highest in a 12 month period. The lowest points came in August 2014 (6,804 new residential mortgages completed) and in January 2015 (8,851 new residential mortgages completed).

The easier access to financing in Spain and the less stringent terms have raised the demand for property creating a more active market and rising sales figures. The banks are in competition with one another to draw in the new home buyers and so they offer special deals, easy terms and lower their profit margins just to get new mortgage clients. Spanish mortgages are some of the most attractive in Europe. Spanish property prices are still some of the lowest in Europe despite the indications of a market recovery. Buyers should take advantage of the low property prices and the easier and cheaper mortgage plans before the Spain property market’s recovery really takes off leading to a dramatic rise in property prices.