BBVA, the first bank to sell mortgages for 100% of the home

BBVA has gone one step further in its strategy to attract customers and for the past few weeks has been promoting the sale of mortgages that even cover more than 100% of the appraisal value of the home. In this way, it becomes the first bank to offer this type of operation by catalogue, which until now was very limited throughout the sector to certain clients who acquired foreclosed flats, the great burden that the system still suffers. |

This type of mortgage, which the Bank of Spain considers high risk, was placed by all entities in the boom era and was one of the causes that led to the debacle of the sector, with the rise in unemployment and the puncture of the housing bubble.

The recovery of the economy and brick, together with the need for banks to increase profitability through increased business, has led BBVA to open its hand in its commercial policy.

Until now, the bank offered different prices on its mortgages depending on the monthly income of the users, that is, depending on their ability to pay. Currently, this segmentation is due to the request for financing, known as Loan to Value (LTV), that is, the money that the client claims on the appraisal value when acquiring any type of property for a first home.

Offer segmentation

This differentiation applies to both variable and fixed rate mortgages. In the former, which is once again encouraged by expectations of a rise in the price of money from 2019, BBVA offers Euribor plus a spread of 0.99%, except for the first year, if the so-called LTV is less than 80%. . If this percentage is higher, the differential increases to 1.25%. The entity also points out that solutions can be found in the event that the client requires more funds to face the purchase of a flat, which could be instrumentalized through the signing of a consumer or personal loan.

This greater flexibility in the credit granting policy entails, of course, more demanding bonding conditions. Users, to be able to access the advantages of the loan, have to have contracted not only direct debit of the payroll or pension, but they must have life insurance, another home insurance and a pension plan with a minimum annual contribution of 600 euro. In the event that the LTV exceeds 100%, the bank may require additional guarantees for the mortgaged apartment, in order to ensure the recovery of the amount granted.

As of today, in its offers no other entity allows users financing for all or, even more, of the value of a home that is not owned by them. All, at most, set the ceiling at 80%, although depending on the conditions and the negotiation with the most creditworthy clients, they may exceed this threshold on exceptional occasions.

Surveillance

For some time now, the Bank of Spain has been vigilant about the risk policy of entities in the mortgage segment, especially those that are not profitable based on price and those whose LTV is greater than 80%.

The commercial battle in the sector is becoming more intense, due to the collapse of the Euribor to negative ground, the further drop in the credit stock and the still significant volume of non-performing assets on the balance sheet. In these circumstances, entities have to increase their business, although to do so they find it necessary to relax their risk standards.

Since the crisis began, the volume of mortgage loans is the only one that has not registered an increase, despite the fact that new operations are growing at double digits. This is because the repayments are still greater than the amounts granted. The mortgage stock is not expected to experience its first rise until next year, after ten consecutive years of decline.

In 2017, volume was down almost 3%. According to data from the Bank of Spain, the entities had credits for the purchase of homes worth 492,000 million on their balance sheets, thus falling below the half-billion mark. The amount reached its maximum in 650,000 million.

The ECB, concerned about low profitability

“Profitability is the main risk for banks in the euro zone,” warns Danièle Nouy, ​​the head of ECB banking supervision, reports Jorge Valero. Banks are in the middle of a fight for their survival, punished by low interest rates, dragged down by 800,000 million euros in ‘toxic loans’, excess branches, a changing regulatory environment, competition from financial ‘startups’ (‘fintech’ ‘) and geopolitical risks such as ‘Brexit’. One of the solutions, according to Nouy, ​​would be to raise commissions.