But now it seems the banks have woken up to the fact that they are not signing any mortgages and as a result, there is good news for those potential buyers still willing to dip there toes.



In fact, right now may prove be as good a time as any to buy property in Mallorca (Majorca). Lets look at the facts. If you had 300.000GBP euros to invest in a second home, holiday home, in a little luxury in Mallorca (Majorca), the chances are that you still have the same amount to spend now. Those 300.000GBP have not gone away.

Yes, if you are a British buyer, the exchange rate is such that you do not have quite as many Euros as you may have liked but who is to say that the GBP is going to recover to the almost dizzy heights of 12 months ago. It may just be that the pound had simply been too strong for too long. Now, I am no currency expert, but I do know that people had got so accustomed to a high exchange rate that they thought it was the norm.

Certainly in the eye of the British buyer, there is a false expectation that the low pound will cause property prices to fall in Mallorca (Majorca). This is not the case and in fact, in 2007, prices in Mallorca (Majorca) continued to rise and our own data for 2008 shows that prices remain stable. The reason, well, there are plenty of buyers in the Euro zone who are unaffected by the exchange rate. At the end of the day, we cannot influence the exchange rate, but we must accept that this might be where the rate is going to remain for the medium term.

Furthermore, the banks are now mobilizing to attract buyers to take by offering much more economical products to counter the negatives of a weakened pound (for the British buyer) and the rising EURIBOR. We are now starting to see the active promotion of mortgage products that, although not new, were never at the forefront of what was being sold.

The word of the day seems to be Multi Currency Mortgage whenever we are approached by a bank about the latest mortgage product offerings. So what do these products offer.

Essentially, they allow you to borrow the capital in a currency other than EURO from a choice of either US Dollars (USD), Swiss Francs (CHF) or Japanese Yen (JPY). Instead of the interest being charged on EURIBOR which is currently on the increase, the base rate that the bank is using is the LIBOR rate for that given currency, on a monthly variable basis. And that is where the bulk of the saving is. The monthly LIBOR Rate for Japanese Yen (JPY) is in the 0.7% region roughly 3 percentage points cheaper than the monthly EURIBOR Rate.

On a 200.000,00 EURO loan equivalent, there is a monthly saving of over 370,00 EUROS with a Multi Currency Mortgage taken out in Japanese YEN with respect to a standard EURO mortgage with similar terms and conditions. In fact, even for the British buyer, this saving actually negates the weakness of the POUND (GBP) in the sense that, if the Pound were tracking at around the 1.45 EUROS rate, your monthly repayment would still be higher if you have a conventional EURO / EURIBOR mortgage.

Now this product is not without risk and is certainly not for everyone, especially not those who are at the limit of their budget. There are two varying factors that can fluctuate and influence the repayment amount every month: the EUR/JPY rate (or EUR/USD, EUR/CHF). If you are a British buyer, add a third element, the GBP/EUR rate. The beauty of the product is that there is the facility to change the currency of the loan during the term. The safer currency being the Swiss Franc (CHF) where there is more stability against the EURO although subsequently, the saving is also less although it does offer peace of mind. Furthermore, you can also revert back to EURO / EURIBOR should you wish.

In terms of costs, to arrange a mortgage in Mallorca (Majorca) , the provision of funds is about the same at 3.5% of the loan amount. As well as an independent bank valuation of the property, there is generally a 1% arrangement fee, 1.6% stamp duty on the total loan risk as well as the notary and the land registry to be paid. This is true for both Multi Currency mortgages as well as traditional Capital Repayment mortgages in Euros.

So, if prices are not falling and if there are mortgage products that are cheaper than the traditional capital repayment, why would you not buy now? If you dont, it may be that the market recovers before you realize and we start seeing the 5% to 18% price increases that we have had in the past and the property you want becomes even more expensive.