Having pushed the pause button post Brexit referendum 2016, Brits had just regained their confidence in the Spanish property market when COVID-19 pulled the rug out from under them. Keen to get a purchase sewn up before the transition period ends in December 2020, many Brits had committed to a deal, paid a deposit, but now have grave concerns that they won’t have the cash to complete when lockdown is lifted.
Spanish mortgage specialists Fluent Finance Abroad says there’s no need to give up on the Spanish home owning dream. “Nobody could prepare for this pandemic,” says Founder Marc Elliott de Lama. “Since Prime Minister Sánchez declared a state of alarm on 13 March, the property market, like most of the economy, has effectively been put on ice. But, once restrictions are lifted, buyers will have to fulfil their purchase contracts or face losing a hefty deposit. With financial uncertainty gripping the UK, many of our clients are worried if they have sufficient liquidity to complete – we think a Spanish mortgage could provide the answer.”
Marc continues: “Whether they’ve signed up to an off-plan deal, a rent-to-buy scheme, or have already placed a non-refundable deposit on a resale property, a Spanish mortgage might help them move forward on the purchase, without using up all their valuable cash reserves – something at the forefront of our clients’ minds during this unprecedented pandemic. Short-term, flexible, over-payment mortgages are available here, which means borrowers don’t have to be tied into a long-term arrangement and can cancel the mortgage at any time, without incurring heavy redemption charges or cancellation fees. Age is not much of an issue, as Spanish banks are able to lend on pension income. Sharing the financial burden of completion with a Spanish bank could be the difference between securing that home in the sun or walking away and losing funds already invested – and the dream.”
“Average mortgage interest rates are very low at the moment, around 2.5%, and likely to remain that way as Europe feels its way through post-crisis recovery,” explains Marc. “Furthermore, the mortgage debt is against the property in Spain and therefore will not affect your creditworthiness or credit score in your home country, neither will it hinder your ability to obtain credit back home. It’s also worth bearing in mind that equity release is almost impossible in Spain, so if buyers are under the false impression they could release funds from their Spanish property at a later date, they should always buy with a mortgage and keep cash reserves in the bank.”
“While we’ve never had to navigate a pandemic, as a business we have been through various crises and recessions, and therefore have an unrivalled insight into the current market turmoil,” finishes Marc. “Fundamentally, western economies were in fairly good shape before this unforeseen turn of events, so my guess is that after a sharp correction of say 10 to 20%, prices will rebound pretty quickly – especially as governments and banks will pump liquidity into businesses and get them back on their feet. In a similar fashion to the global financial crisis of 2008, I anticipate that hotspots such as Marbella and Mallorca will be less badly hit. To illustrate this, in the last figures compiled by the National Statistics Institute prior to the COVID-19 outbreak, ‘tourist’ areas such as Andalucía and the Balearics posted very healthy demand, with house sales rising 8% and 8.2% respectively versus February 2019.”
Brits have a huge influence on the Spanish property market. There are between 800,000 and one million British homeowners in Spain, although only around 300,000 are residents. According to the Registrars Association, they currently make up 13% of all foreign buyers, down from a peak of 22% in the first quarter of 2016, pre-referendum and pre-devaluation of the pound. Experts believe, however, that British demand will pick up when Brexit negotiations come to a favourable conclusion. The UK Government is resuming talks with the EU this week.
For a free, no-obligation mortgage request and agreement in principle, contact Fluent Finance Abroad on 00 34 952 853 647, or email info@fluentfinanceabroad.com. Mortgage approvals, valuations and completions are all possible during the Spanish state of alarm.
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