When banks in Europe and the US collapsed in 2008, getting a mortgage became nigh on impossible. But what are lending conditions like for today's overseas buyers? Here's a round-up of finance availability in our favourite sunny destinations
Two years on from the collapse of investment bank Lehman Brothers, which marked the start of the financial meltdown, the financial landscape has changed across the globe. The days of generous, even irresponsible, lending are well and truly over and it's now far harder to get a mortgage on a property abroad.
Just how hard, though, depends on where exactly you wish to buy, and conditions vary widely between the mortgage markets in our favourite second-home locations. "Banks are much more cautious with their loan to value (LTV) ratios, their risk profiles have changed, and interest-only deals are now a thing of the past," says Clare Nessling of the broker Conti Financial Services (www.mortgagesoverseas.com).
"France has been hit the least, and is our biggest market; in Spain, loan to value ratios have dropped hugely and American banks are still very cautious. "Turkey is a big market for us, with lending having got easier, yet Cyprus
is very tricky indeed these days."
It's possible to argue that the time is ripe to borrow in France, with interest rates at historic lows and 100 per centmortgages still available, though 80-85 per cent is more typical. Most people are opting for 20-year plus fixed-rate deals which offer great rates, according to John Busby of Athena Mortgages (www.athenamortgages.com). "The TEC10 Index [on which French fixed rate mortgages are calculated] has been falling all year and recently reached an all-time low of 2.6 per cent, not seen since 2005," Busby says.He can offer 15-year fixes from 3.3 per cent, 20-year from 3.45 per cent and 25-year from 3.6 per cent, all on a80 per cent LTV.
"National banks have different lending criteria, but rates differ between regional banks - which can offer best deals," adds Busby. "Regions with the lowest rates are Bordeaux, Limousin, Poitou, Charentes and Midi Pyrenees. Examples of low capped rates (one per cent over cap) in these areas are: 15 years - 2.55 per cent; 20 years - 2.7 per cent; and 25 years - 2.85 per cent, at 80 per cent LTV."
For really low variable mortgages you need to look to the Haute Savoie and Savoie, and for rates based on the Swiss Libor rate, he adds.
"Rates are below one per cent so for an average 20-year mortgage at 80 per cent LTV, the rate would be in the region of 0.7 per cent based on the three-month Libor rate plus 0.5 per cent."
This is a tough market at the moment, with the widest range of products at 60 per cent LTV, unless of course you buy a property owned by a bank, who may offer 100 per cent. Interest-only deals have near enough disappeared - though Lloyds TSB/Banco Halifax Hispania still offer them - so repayment deals prevail.
"For variable loans, expect to pay 1-1.5 per cent above the 12-month Euribor [currently 1.42 per cent but on the rise] so you are looking at paying a rate of 2.5 to 3 per cent," says Heather Chambers of brokers International Mortgage Solutions.(www.internationalmortgage.org).
"But there is also a range of fixed rate deals available with 5 to 25 year terms. Two really good deals on offer
are: Sol Bank offers the best variable rate, 1 per cent above the 12-month Euribor, up to 70 per cent LTV; or Barclays offers a five-year fixed at 3.2 per cent (after which it is Euribor plus 0.49 per cent), at 65 per cent LTV."
As one of the other ailing economies of the EU, Portugal is a mixed bag. Whilst Lloyds TSB International have stopped lending there completely, other banks have reduced considerably their mortgage portfolios and fixed rate deals have disappeared. Conti Financial Services works with five banks and typically offers 70 per cent LTV (though 80 per cent is possible), 30-year repayment deals with rates of 3.35-4.1 per cent.
Caixa Geral de Depósitos, the largest (government backed) bank in Portugal, offers 30-year mortgages of 75-80 per cent LTV at rates of 3-4.6 per cent - see www.liveinportugal.com.
"Overall, there are lower LTV - with some lenders only offering 60 per cent - as banks are squeezing customers from two directions, by reducing the amount they can borrow based on lower income affordability, and the lower LTV," says Judith Price of Caixa Geral.
For a country which didn't offer mortgages at all until 2007, great strides have been made yet products are still limited, according to specialist broker Caglar Akpolat of www.turkeypropertymortgages.com.
"Not all Turkish banks lend to foreigners yet, and those that do prefer shorter term mortgages, the longest
is 20 years but 10-15 years is more typical. Turkish bank rates are typically 6-6.5 per cent and LTV is 70 per cent.
"The French bank, BNP Paribas, is now the biggest lender in Turkey, offering 4.2 per cent on 70 per cent LTV over 20 years, variable.
"But there's also a Dutch bank, DHB Bank, offering 1-, 3- and 5-year fixes in Sterling, for example 6.6 per cent fixed for one year with a 20-year-term."
A niche market hit quite hard by the credit crunch, Italy's mortgage products have shrunk but are starting to come back, according to Simon Smallwood of brokers International Private Finance.
"We are seeing fixed rates more popular than six months ago due to the low interest rate and people's caution," he says.
"The interest rate has been 5-6 per cent over the past 10-15 years but now it's possible to get a fixed rate deal
for 4.3 per cent over five years; or a variable rate deal at 2.6 per cent on 80 per cent LTV."
"The recent entry of BNP Paribas into the market, offering loans of 80 per cent LTV [rather than average of 70 per cent] has really got other lenders sharpening their pencils and we expect to see a gradual improvement of finance deals over the next six months."
American banks are very risk-adverse and foreigners are deemed risky propositions, according to Florida based broker Bob Stobaugh of the Sentinel Mortgage Company (001 941 365-5626).
"If British buyers can't pay cash there are really two alternatives," he says. "If you can put down 50 per cent,
Lloyds TSB offers rates in the 3-3.25 per cent range over 30 years, at a variable rate.
"Alternatively, there are private Florida banks which offer 60-65 per cent LTV on a fixed-rate deal - five
years - at 6.5 per cent rate with no early repayment penalty.
"More people are putting down 35- 40 per cent and going for five-year fixes which they'll pay off within that timeframe. Eighteen months ago Bank of America was offering 30-year fixes for non-US citizens - at six per cent - but now you must have a Green Card to get one."
France has been hit the least; in Spain, LTV ratios have dropped hugely; American banks are still very cautious; Turkey is a big market, with lending having got easier; and Cyprus is very tricky indeed these days.