Spanish banks have abandoned their “Mad Mortgages” that fuelled sales of 1,000s of holiday villas and apartments repossessed from troubled developers and families during Spain’s recession years.
With the country’s real estate market almost back to the peak level of 2007, leading banks have this week stopped offering generous mortgages of up to 110% of the purchase price to domestic and international buyers.
All the banks have been under pressure from their regulator, the Bank of Spain to get rid of the excessive loans as an anti inflationary measure. Now branch managers have been told there will be a gradual withdrawal of mortgage deals between 90% and 110% which meant a typical buyer had to find only €3,000 in cash to buy a property costing €100,000.
Thousands of buy to let investors snapped up bargain Costa apartments carrying peak to present discounts averaging 44%. Families around Europe saw the “Mad Mortgages” as the best way to get a home in the sun with interest rates starting at a below inflation 2%.
Said Ben Walker of Spanish bank property specialists, Walker Property Spain: “Last month there was just one bank offering 110% mortgages and we were warning our buyers to get a move on. But now all these mad mortgage offers in Costa del Sol have gone and we have just four developments with 110% mortgages in Costa Calida / Murcia.
“From now on buyers will have to find 10 times the cash to cover deposits and costs when buying a property costing €100,000, but producing €30,000 upfront is unlikely to slow sales in the current buoyant market.”
Spanish banks’ price cuts and freebies
In some cases there will be price cuts and free furniture with maximum 80% loans instead and that will bring down the buying costs for everyone. One bank will offer price cuts linked to the percentage of mortgage.
Walker Property Spain are still offering 110% mortgage deals in Costa Calida / Murcia, but warn they could be withdrawn without notice and replaced by price cuts and maximum loans of 80%.