Mortgages in Spain: stricter than they seem

While international bodies this week called on Spain for stricter criteria for granting mortgages, the Bank of Spain has toned down the debate, assuring that it is not urgent and that if action is needed, it will be done in a “ surgical ” manner. But, at what point are we really?In theory, in Spain mortgages are limited to 80% of the lower value between the appraisal and the purchase price of the property. In practice, however, some entities finance up to 100%, especially for young people, in exchange for a higher interest rate or demanding additional guarantees. And this has a very high cost: an increase of one or two percentage points on a 25 or 40-year mortgage can end up costing tens of thousands of euros more in interest. Furthermore, unlike in other European countries, very long terms continue to be common in Spain, as they are not limited in years.And what about the rest of Europe? France, Germany, and Italy also typically limit financing to 80%, but with maximum terms of between 25 and 30 years. The United Kingdom raises the limit to 95% with a 30-year term, and the Netherlands is the most permissive case, with mortgages that can reach 100% of the property value. This comparison shows that Spain is already among the European countries with the most demanding criteria for granting real estate credit.The debate, however, is not only financial but also social. In a context of soaring housing prices and salaries that are not growing at the same rate, further tightening mortgage conditions could make it difficult for a generation that already has increasing problems to become independent to access homeownership. This time, I agree with the Bank of Spain when it says that this measure would put even more pressure on rental prices.