Mortgages in Spain: stricter than they seem

While international organizations this week called on Spain for stricter criteria for granting mortgages, the Bank of Spain has lowered the tone of the debate, assuring that it is not urgent and that if action is needed, it will be done in a "surgical" way. But, where 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 manage to finance up to 100%, especially in the case of 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 happens in the rest of Europe? France, Germany or Italy also usually limit financing to 80%, but with maximum terms of between 25 and 30 years. The United Kingdom raises the limit to 95% with a term of 30 years and Holland 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 in granting real estate credit.The debate, however, is not only financial but also social. In a context of soaring housing prices and wages that are not growing at the same pace, further tightening mortgage conditions could hinder access to purchase for a generation that is already having increasing difficulty becoming independent. This time, I agree with the Bank of Spain when it says that this measure would put even more pressure on rental prices.

The Bank of Spain cools the urgency of limiting mortgage lending despite price increases