France



France

The country has a remarkably small mortgage market for an economy of its size and sophistication. Yet, by world standards, loan terms are considered consumer-friendly. More than half the loans there have fixed rates, but the term is typically less than 20 years. Fifteen-year terms are most common. Prepayment penalties are limited by statute, but required down payments are as much as 40%. Also, a borrower's credit record and capacity to pay are deemed more important than the underlying value of the property.

Outstanding mortgages: The ratio outstanding mortgages/ GDP is increasing at a significant pace due to low interest rates and longer loan maturities. However, it remains one of the lowest in the EU, as equity withdrawal does not exist yet.

Gross lending: it is growing fast, due to remortgaging and housing price increases. Type of lenders

Gross lending is mainly distributed by commercial banks; specialist mortgage banks are currently very few and only represent a small market share. There is no subprime lending. (EMF Fact sheet)

Sweden

Housing production -- The building of new homes fell to very low levels during most of the 90s due to a financial crisis. From 2000 onwards housing production has increased again. The new residential buildings mostly consist of one-family homes and tenant owned apartments. The production of houses with rented apartments has been limited.

Housing prices - Since the end of the 90s and until 2005 house prices have increased between 5 and 10 % annually. At the beginning of the 90s Sweden was stuck by a financial crisis and the prices fell in 1992 and 1993.

Mortgage institutions & loans - Mortgage institutions represent almost the whole of the market for mortgages in Sweden. However, the majority of mortgage institutions are owned by banks. A small number of banks without a mortgage institution offer mortgages directly through the bank. Since 2005 a small number of financial companies have started to offer loans to the sub-prime market and equity release.

A wide variety of mortgage products are offered in Sweden. From normal mortgages with variable and initial fixed interest rates to loans to the sub-prime market and equity release. At the end of the 90s the share of variable interest rate loans rose to around 50% of new mortgage loans and the share has remained more or less at the same level since. Among the initial fixed interest rates the shorter periods, 1 to 5 years, have been the most popular for several years.

Spain

Housing Prices -- According to the Spanish Central Bank, home prices have more than tripled over the past decade, surpassing the gains seen in most U.S. residential real estate during the same period. (another source says the Spanish mortgage market increased six fold from 1996 to 2005.) The strong demand for housing can be explained by decreasing interest rates, strong economic growth and positive developments in the labour market. The rate of increase in Spanish home prices slowed to 9.1% year-over-year in the fourth quarter of 2006, down from nearly 13% a year earlier and 17% two years earlier; and housing starts increased a meager 2% in 2006.

Housing Demand/ Buyers -- Real estate lenders have increasingly targeted the country's burgeoning population of poor, young immigrants, who very often have short and/or sketchy credit histories.

Additionally, Spain's coastal regions have attracted a flood of home buyers from Britain, Ireland, Germany and other parts of Europe during the past few years, fueling sales of a staggering 4 million homes to foreigners, according to the Vacation Homes Agency in Madrid. With the Spanish housing sector having started more than 700,000 housing units in 2006 (a number well above the rate of new household creation in Spain, which is approximately 500,000), a slowdown in the rate of foreign buying could prove devastating to the sector.

Loan Defaults -- Spanish homeowners may be much more vulnerable than their American counterparts to default risk in the face of rising interest rates, with a striking 98% of mortgages in Spain structured as variable-rate loans.

Interest Rates -- With Spanish real short-term interest rates having been very low for the past decade (averaging 0.1% since the late 1990s), both real estate agents and home buyers may be assuming that low rates will continue indefinitely. After seven rate hikes by the European Central Bank (ECB) since 2005, some holders of variable-rate mortgages in Spain already appear to be feeling the pain. Delinquencies on Spanish home loans reached the highest level in at least four years in the fourth quarter of 2006, according to Standard & Poor's.

Mortgage products - The most popular mortgage product in Spain is the variable rate (referenced) mortgage, with rates reviewed every 6-12 months => great vulnerability as more than 98% of mortgages in Spain structured as variable-rate loans. With Spanish real short-term interest rates having been very low for the past decade (averaging 0.1% since the late 1990s), both real estate agents and home buyers may be assuming that low rates will continue indefinitely. Fixed rate mortgages (the interest rate is fixed for the entire duration of the loan) are available, but account for less than 0.65% of total mortgages outstanding (2005 data).

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