100pc LTVs (or even more) back on the table

Some brokers report mortgages of 100pc plus expenses, even for foreign buyers

Banks are pulling out all the stops to shift the homes they have taken onto their books, even if that means starving the resale-market of mortgage financing.

One broker tells me that one of Spain’s lenders has “increased maximum LTVs for non-residents buying their distressed properties to 100pc (previously they only gave 60% or 70% if you were lucky).

“For residents, the offer is 100% PLUS expenses for distressed properties, and 100% excl expenses for repos.”

And the Spanish press reports that banks are offering 100pc LTVs, mortgage terms of up to 50 years, and interest-payment holidays of 3 months to 2 years or more.

Why are banks doing this? you may ask. To avoid having to recognise losses on their property portfolios, is the short answer. But it’s not necessarily a good deal for buyers. The financing terms look sweet, but buyers are taking on a high risk of negative equity (which might not matter much if you are financially secure and buying a primary home for the long-term).

Buyers would be better served by lower property prices and higher financing costs. After all, mortgage rates aren’t going to go any lower, but house prices might.



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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com.