As usual for this time of the month, the INE has released mortgage issuance figures for Spain. The month of August saw a continued moping along near the lows for total residential mortgages, something similar (but a bit more lively) for the total amounts loaned and no apparent end in sight - despite the slightly lower amount for August with respect to July - to the uptrend in the average amount doled out.An item of considerably more interest comes from a series we only sporadically track and report merely to make the point that mortgage issuance is not necessarily a proxy for home sales. Or perhaps we should change that to was.
Updating our chart of the ratio of the number of new residential mortgages constituted to residential sales for the first time since last winter, we came up with the surprise on the left.A figure which had generally tracked along at between 1.5 and 1.6 mortgages per home sale then falling in the aftermath of Bear Sterns and (especially) Lehman Brothers before recuperating strongly to 1.75 as the 2008-2009 credit freeze-related backlog of loans got cleared, has suddenly fallen to 1.14. Home buying accounted for nearly all of mortgage lending in August - this without making a noticeable dent in volumes or amounts.
Are Spain's banks and cajas now accepting lesser collateral (cars, motor boats, teenaged children) as guarantee for non-real estate loans? Not too likely given the chronic stupor of the Spanish economy.
Are they refusing to lend for anything that does not move, either directly or indirectly, a repossessed home off their books?
Suggestions in the comments box.
Our more astute readers might have noticed a certain dearth of posts recently. Other Matters have intervened. Specifically, and far from off topic, a cousin suddenly flopped the care and feeding of a couple of thousand olive trees on our lap. She had had the property up for sale and when her fantasy of pocketing 600,000 euros (100 million pesetas - the Law of the Many Zeros) was met with the reality of one offer of 390, she decided to harvest instead. To explain our absence, none of the autumn maintenance had been done.
What the buyer was willing to part with priced the parcel at about the year 2000, by the way.
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5 Comments:
Could this be people refinancing due to realizing that their mortgages had floors on the interest rates?
I would also imagine that in the past people took out mortgages on homes as their equity increased. Not much of that anymore.
I dunno...
The INE already have their own category of 'changed' mortgages. In any event, that mortgage issues continue flat but amounts and average amounts increase - the whole thing should be increasing a lot with your plan. The figures aren't net.
Are they refusing to lend for anything that does not move, either directly or indirectly, a repossessed home off their books? -- the answer is YES.
I have been told by a banking pajaro, and sorry I have no proof, that 75% of loans given are only for assets on their books...to get them off their books.
Which means for example, if you loaned 100 to Don Quijote, and the bank has taken his horse, the bank has sold the horse to Sancho Panza for 60 (via a loan). So they have 60 less in bad laons but still 40 as a questionable receivable, which they will squeeze out of DQ until he no longer breathes. As for the books, most of the 40 has been written off already, any remnants will be quietly written off within the next few years.
The other option is packaging (yikes!) the remnants of the "40" from many bad loans and selling it at a discount, but would appear as a profit since it was already written off.
Right. More to the point is that they get to rid themselves of the 30% provision for the house in question.
Thanks
I don't see how there would be a direct effect on the ratio due banks only selling their own inventory... it's still a mortgage + a sale.
A couple other ideas:
1) More people buying with cash instead of a mortgage. I know this has been happening a lot in the US foreclosure market. I don't know how common it is here.
2) Less people getting new mortgages on places that are already paid off.
I remember in the boom times parents would put a mortgage on their existing home in order to provide the downpayment for their kids.
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