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Property in Spain: Why mortgages are now cheaper than ever

Property in Spain: Why mortgages are now cheaper than ever
Clifftop houses in the majestic city of Ronda in Malaga province, Spain.Photo: Tomáš Malík/Pexels
If you’re looking to buy a property in Spain this year, then you’re in luck. Not only have property prices fallen in many regions across the country, but banks are also offering lower interest rates and more favourable mortgages too.

Mortgages are one of the top buyer concerns in Spain, according to Inspire Property Experts – how to access one and how to make sure you’re getting the best rate. 

The pandemic has caused a lot of financial uncertainty for many, but if you are in the position to be able to buy a property now and want to take advantage of the lower housing prices and cheaper mortgages at the moment, then read on.

Low-interest rates

The pandemic has set a trend for cheaper mortgage loans and an increased commitment to fixed interest rates. 

“It’s a buyer’s market and a good time to buy property right now”, says real estate agent Raf Jacobs from Inspire Property Experts in Barcelona, who also runs a series of property webinars.

Interest rates in Spain are now at their lowest point ever, meaning more favourable mortgages for buyers. 

“Borrowing money has never been cheaper,” says Jacobs, which means that buyers could borrow more to be able to buy better properties. 

In 2019, Spain rolled out new mortgage laws with favourable conditions for both residents and non-residents. These included longer default periods before repossession and the green light for borrowers to convert foreign currency for mortgages into euros.

Combining these conditions with the cheaper mortgages offered today, creates a good opportunity for buyers. 

Why have interest rates fallen so much?

The number of mortgages being taken out in the first few months of lockdown in 2020 almost halved according to Europa Press’ EPData, meaning fewer people borrowing from the banks. 

This caused Euribor, the reference rate for mortgages, to fall to -0.48 at the end of last year, which pushed banks to offer lower rates through their mortgages in 2021.

The average interest rate is published every month by the Bank of Spain and the trend for lower mortgages started last year when the rate fell from 1.81 percent in March 2020, to 1.75 percent towards the end of 2020. 

More fixed rates than variable ones

Last year there had already been a trend towards more fixed mortgage rates, but this year it has been reported that over 70 percent of mortgages granted in Spain are now fixed-rate ones. 

The sharp decline in interest rates generated a drop in variable mortgages. Many banks in Spain decided to promote their fixed mortgages instead to create greater profitability. Some of the banks that have lowered their fixed mortgages are BBVA, Santander and Openbank.

This created a banking war, with banks fighting to provide more attractive mortgage deals to their customers, according to Oi Realtor.

Which banks are offering the cheapest mortgages right now?

According to price comparison website Kelisto.es, the banks that are currently offering the cheapest mortgages rates – both variable and fixed – in March 2021 are MyInvestor, BBVA and Liberbank.

The website says that there has also been an increase in the number of online banks offering competitive mortgages recently, of which MyInvestor is one. The other online banks offering the cheapest mortgages right now are Openbank, the online bank of Santander; EVO Bank and COINC.

Things to be aware of

Mortgage rates may be more favourable right now, but the requirements in order to be granted one are a lot stricter than they have been in the past.

The main requirements are having a stable income, having a job contract and having a certain amount of deposit. Many banks in Spain are currently asking that you have around a 40,000 to 50,000 euro deposit, depending on the price of the property.

This has made it slightly trickier to get a mortgage because of job uncertainty, redundancies and reduction in customers and clients, during the pandemic. 

“Business models for banks in Spain have changed over the past few years”, says Jacobs. “Margins have dropped significantly because of the low-interest rates and banks are looking at new ways of making money”. He predicts that there will be many bank mergers over the next few years, but says this will be less helpful for buyers because there will be “Less service, and less information for clients”.

There is a difference in what type of financing you can access from Spanish banks depending on whether you are a resident or a non-resident. Residents will usually be lent around 70 to 80 percent of the total property amount and get better interest rates, whereas non-residents can only expect a Spanish bank to cover around 60 percent of the cost.

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Properties in Spain

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