100% Mortgages to Boost Spanish Property Market

February 24th, 2010

Buyers in Spain could be able to secure 100% mortgages for the first time during the downturn thanks to a new developer-bank partnership.

Customers buying from UK-based developer Almanzora Group will be able to apply for 100% loan-to-value finance through the Bank of Andalusia on properties with discounts of up to 55% off peak price.

The developer has been selling around three properties per week since the start of the year and hopes the new mortgage offer will provide an extra boost to the Spanish property market. The large discounts make the properties more affordable and so the bank can feel more confident about buyers’ ability to repay the loan, said Almanzora’s sales and marketing manager Simon Coaker.

“In some cases, the mortgage available is larger than the amount actually payable by the purchaser,” he said. “This is because, following last year’s price reductions, current prices of a number of properties are actually lower than the bank valuations.”

Although the number of mortgages issued in Spain rose year-on-year for the first time in two years in November 2009, such high loan-to-value rates have become almost unheard of in Spain due to increased conservatism among lenders. However, banks are more likely to lend to customers buying repossessed properties or from developers backed by bank funding.

“There are some 85% loan-to-value loans available for bank-owned properties but generally there is still little movement in the market,” said Clare Nessling, operations director for international mortgage broker Conti.

Coaker told OPP that Almanzora was in partnership with the Bank of Andalusia to fund certain elements of its projects, but that the bank also wanted to take advantage of the sales opportunity.

“The banks have seen us doing well and are interested in dealing with our clients,” he said. “Some of our own mortgages are with the Bank of Andalusia but they have competed against other banks for our customers’ business.”

Addressing the long-term sustainability of such large price reductions, he said: “We wanted to create real interest in the property so have allied a mortgage product to selective discounts that will incentivise the market. But we think the 55% discounted stock will sell very quickly and we anticipate raising prices hopefully by mid-year.”

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