The Catalan separatist drive to break away from Spain is starting to have a negative impact on mortgage lending in the region, with worrying implications for the housing market, reports the Spanish property portal Idealista.
This is an abridged translation of an article published by Idealista.
There’s no longer any doubt about the effect of a possible unilateral declaration of independence on the Catalan economy. Along with the stampede of hundreds of the largest Catalan companies fleeing from the region and the threat of ratings agencies to drop Catalonia’s rating still further, comes the decision by some banks to tighten their mortgage lending criteria. They’ve also decided to put all their business on hold in the region and not approve any more mortgages until political uncertainty is cleared up.
Over the last few days numerous pre-approved mortgage applications to buy property in Catalonia have been put on hold, and the situation is likely to get worse over the next few weeks. According to experts consulted by the property portal Idealista, banks are concerned that the crisis will led to a regional recession, and have a knock-on effect in employment. In addition, there are legal risks and a currency risk as Catalonia would have to leave the euro immediately if independence was declared.
“Either the legal uncertainty that would affect the mortgage market in a hypothetical Catalan republic is resolved, or fewer mortgages will be approved,” said a bank manager who asked to remain anonymous.
September saw a considerable drop in property sales in Catalonia, and everything points to the situation worsening over the next few months due to lack of mortgages and the decision to put off buying until the political scenario is cleared up. Some market experts claim that even sales with a fixed completion date have been called off.
