Please find below a selection of news excerpts and information that relate to the Spanish mortgage and property market.

A report about the dismal state of the Spanish economy. 

Spain: Big business demands savage attacks on working class following bank crash
4 April 2009
Big business leaders in Spain are stepping up their demands for labour reforms following the crash of regional savings bank Caja Castilla la Mancha, the first since 1993. After attempts to coordinate a buyout failed, the Spanish government was forced to inject €3 billion ($4 billion) into the bank to plug a "hole" in its finances and provide €9 billion ($12 billion) in loan guarantees.
The bailout has destroyed the myth that Spain's banking system was "immune" from the global financial crisis. According to economics professor Antoni Espasa at Madrid's Carlos III University, "The Spanish economy is in for a ferocious fall... It's going to suffer more than Europe and take longer to recover."
Dominic Bryant, Spain expert at BNP Paribas added, "The economy is in dire straits... The adjustment will be enormous."
When the economic crisis first broke José Luis Zapatero's Socialist Workers Party (PSOE) government boasted that the country's large budget surplus and tough regulations and controls on financial transactions would allow the country to resist the worst of the global crisis. This nationalist chimera has been burst. This month, the Economist warned, "Back in September Mr Zapatero had expressed his confidence that the downturn would bottom out fairly quickly, helped by ‘perhaps the most robust financial system in the world'. The recent rush of policy action would suggest that the outlook is now not quite so rosy."
On March 23, Finance Minister Pedro Solbes announced that the government was preparing a plan for major bailouts using public funds, after admitting that the banking sector was not immune from the international crisis.
Within days news of CCM's demise was announced. Bank shares tumbled on the Madrid stock exchange, led by a seven percent fall in Banco Santander, the largest bank in the eurozone area. "There must have been no other way out," said Intermoney SA's chief economist José Carlos Díez, "This was not the preferred option."
CCM's problems followed the downgrading of a number of Spanish banks earlier this month by investment bankers Goldman Sachs, who warned that there were likely to "suffer disproportionately" in the coming months. "With Spain facing a spike in unemployment and a burst real estate bubble, signs of severe credit deterioration abound," it added.
In Castilla-La Mancha, for example, nearly 70 percent of houses built over the last three years remain unsold and tourism, the second biggest business, saw a 15 percent fall in visitors this month after similar falls in preceding months. Goldman Sachs believes that Spanish banks have calculated their bad loans in "too narrow" a way, which "masks the true damage."
"The impact is likely to be greatest for the domestic operators but we see international banks as far from immune," Goldman Sachs said, referring to banks such as Santander.
The Bank for International Settlements has also drawn attention to the dangerous $332 billion worth of exposure of Spanish banks in Latin America—far higher than US banks—and that some countries there may default on loans.
On top of this, Spain has become the first member of the eurozone to go into deflation following eight months of falling prices. Credit Suisse reported recently that the nine percent fall in house prices over the last year was insufficient and warned that they are still 50 percent overvalued. This will have catastrophic consequences in terms of negative equity for many families who are spending an average of 7.2 times income on mortgages.
When the problems with CCM emerged, Finance Minister Pedro Solbes admitted that a number of regional banks had been "exposed" by the collapse in the property and construction sectors and were being carefully monitored. He declared, "If we continue with the liquidity problems we've got at the moment, I don't think we can say that anybody is immune."
Bank of Spain Governor and European Central Bank member Miguel Ángel Fernández Ordóñez put the blame for the crisis on the working class, complaining that "The state of the budget is deteriorating notably because of the pressure from the rise in social benefits" as a result of increasing unemployment. He called for the government to "undertake structural changes in the labour market with a "greater emphasis on productivity."
Spanish Confederation of Business Organizations chairman Gerardo Díaz Ferrán demanded the lifting of legal restraints on firing workers and severance pay cuts from 45 days per year of employment (up to a maximum of 42 years) to 20 days per year with a maximum of 12 payments—a demand supported by the Organisation for Economic Cooperation and Development
The International Monetary Fund has also claimed that "Labor market reform is the most important missing policy issue" for Spain and called on the social partners (government, big business and trade unions) to agree to stop the indexation of wages with inflation, extend opt-out clauses in collective bargaining (i.e., allow more job losses) and reduce dismissal costs "to boost hiring and mobility".
The PSOE's stimulus measures are a response to big business demands. These include further incentives to companies that hire workers on a part-time basis, which can only increase the number of workers already condemned to eke out an existence on "rubbish contracts"—currently one third of all jobs. The government has also extended the exemption on social security contributions granted to the auto industry to all businesses encountering financial difficulties for two or possibly three years. The social security contributions of companies hiring workers in the technology and renewable research sector will be paid by the state. This is a huge tax break for the rich at a time when millions are dependent on social security payments and state income is already facing a serious deficit through falling tax revenues—14 percent in 2008. As José Maria Mollinedo, head of Spanish tax inspectors union Gestha noted, "When there's a crisis, the first thing businesses stop paying is tax."
Since the beginning of this year one million workers have lost their jobs in Spain, bringing the number of those officially unemployed to nearly 3.5 million. The country's second-largest bank, BBVA, issued a study recently saying that unemployment will rise to 4.1 million by the end of this year and hit 4.5 million in 2010.
Spain's auto industry, which employs 350,000 is in a particularly desperate condition. Whereas Nissan's production world-wide fell by 54 percent "year-on-year," in Spain it dropped by a staggering 90 percent. The drive to cut costs and increase efficiencies in what one government minister described as the "export lungs" of the economy has relied almost entirely on the trade unions. At Nissan the trade unions have agreed to slash 1,680 jobs at its plants in Barcelona.
Last week, the Associated Press carried a report on the situation facing construction worker Antonio Montoya, who until recently "could afford two cars and a nice duplex for his family of six, with a sunny patio and pet canaries singing away. Spanish real estate was booming, jobs were abundant, and as Montoya would drive past the unemployment office, he felt like he was gazing at another planet. ‘I would say to myself, I'd never be in that situation.'
Now Montoya has been forced to go to that same office, "catching a bus to save on gasoline, and joins the sullen, ever-growing line. He sniffs out job offers, signs for his 750-euro ($970) monthly benefit and goes back home, often to meals of leftovers. In disgust Montoya states "Imagine now, here I am at age 54, without a job... I don't know how long I will be able to hold on."
The AFP global edition March 16 described the fate of La Lantejuela in the south west of the country where "dozens of warehouses where bricks, marble and other building materials were once produced lie idle since a decade-long economic boom came to an abrupt end last year. During the height of the country's credit-fuelled property boom the dozens of small and medium sized building firms which sprang up in La Lantejuela employed up to 80 percent of the town's workers as local residents abandoned farm work for more lucrative jobs in construction."
It continues "Today nearly 75 percent of the town's economically active population is jobless, one of the highest unemployment rates in Spain, which in turn is the nation with the highest jobless rate in the 27-nation European Union. Between the end of 2007 and the end of last year the number of unemployed in La Lantejuela jumped by 132 percent".

Report on the UK mortgage and housing market, following the news that mortgage lending has increased, and net debt has reduced, as people take advantage of the lower interest rates in order to pay down their mortgages and other debt. One benefit of lower mortgage rates is that it frees up extra cash for people to pay back those credit cards etc. This will hopefully also be of benefit to those UK based people with Spanish mortgages. Eurozone rates have fallen to 1.25% yet because most Spanish mortgages are based on the 12 month Euribor, many people are stuck with higher rates for several months.

We've yet to put our houses in order
Gordon Browns hopes of positioning himself as the saviour of the UK economy, if not the planet, have been boosted by the promises of a new world order coming out of the G20 summit in London, but it is a bit premature to suggest he has resurrected his political fortunes. His claim that the G20 agreement could lift the world out of recession next year looks hyperbolic. I don't want to be churlish, but there is no new major fiscal stimulus; there is not enough on green investment; it is not clear that the G20 has beaten back protectionist impulses; and there are no concrete measures on banks' toxic assets. In any case, voters in the UK are less interested in the global picture than they are in the situation much closer to home - quite literally, their own home: Brown's success with the electorate will depend more on the state of the UK housing market than on his gladhanding on the international stage.
The surprise uptick in the Nationwide house price index for March, downplayed by the lender itself as a blip, set off a flurry of speculation that the market had bottomed; that, though, says more about our national obsession with property than it does about the green shoots of recovery. Estate agents are certainly hoping that the drop in interest rates, and the fall in house prices we have already seen, will do the trick. They point to a rise in mortgage approvals to a nine-month high of 37,900 in February, from a low point of 27,330 in November, and to an easing in credit conditions, as two big lenders, HSBC and the Woolwich, cut the size of the downpayment they demand from borrowers to qualify for cheap deals.
My instinct is that this is wishful thinking. Mortgage approvals are still 65% lower than pre-crunch levels, and well below the early 1990s downturn, and although a couple of lenders have cut the size of the deposits they require, it isn't a huge help to first-time buyers, who still have to put down 25-30% of the purchase price to get the best deals.
The rival Halifax index, which registered a drop of 1.9% last month, gives a bit of ballast to my view that the slump in property values is far from over, though transaction volumes are so low that it is hard to take a robust reading from either.
The key determinant of house prices is unemployment, and with a jobless total of more than 2 million and 4,000 UK jobs going last week alone from companies including British Airways, Aviva, and Bombardier in Northern Ireland, the picture is grim. The rate of business failures, according to new research from Equifax, is 35% higher in the first quarter of this year than in the same period of 2008; although companies are now going bust at a slower rate, there is a risk that more will tip over the edge in the new tax year because they are unable to meet Revenue demands. Hardly surprising, then, that borrowers are taking the fall in interest rates not as a buy signal but an opportunity to pay down their mortgage debts.
House prices have fallen by about 21% since their peak in October 2007 but UK domestic property is still significantly overvalued. The Halifax house price to earnings ratio remains almost 10% above its long-run average. IHS Global Insight is predicting a further 15% drop from here; fund manager Jeremy Grantham of GMO is forecasting a further 25% fall.
We must hope that Gordon Brown is right and that there are pinpricks of light at the end of the tunnel. But house prices, which had soared into the realms of fantasy, need to recouple with wages, employment and the performance of the economy as a whole. That journey back to reality is not over yet
Lord Mandelson is, quite rightly, looking at a new industrial activism so that the UK can chart a path away from our unhealthy overdependence on financial services and the City. He is identifying strategic businesses as those that are green, highly skilled, digital and creative. That's all wonderful: I would just add "family-friendly" to the list.
The current downturn threatens women's employment like never before. In past recessions in the UK and the US, female incomes have insulated families because male-dominated industries were worst hit, but not this time: sectors such as retail, which have a predominantly female workforce, are in the frontline.
There is also likely to be a second wave of job losses in the public sector - a major employer of women - later on in the recession, as the state and local government are forced to cut costs.
Many women who lost their jobs in the dotcom bust found it hard to regain a foothold in the workplace; the 2001 downturn signalled the end of the long-term rise in women's employment rate. That is not just a problem for career women but for millions of ordinary families: working wives typically bring home a third of household income, and single mothers are sole breadwinners.
Employers and the government need to take steps to make sure family-friendly working and childcare do not suffer in the recession. If skilled and talented women are driven out of the workforce, it will be a huge loss to individual employers and the economy as a whole.
Flexibility, on the other hand, can help both employers, seeking to trim costs, and employees, who want to keep their jobs.
Childcare is key. If a woman has to work reduced hours, the economics of sending a child to nursery may no longer work, and if too many children leave, private sector facilities may go out of business. Nursery care does not cease to matter just because a mother loses her job: the lack of it can make it harder for her to attend interviews or to return to the workplace.
Making family-friendly working and childcare strategic priorities will not only help parents through the recession but also boost consumption and growth. Childcare should no longer be viewed as just a women's issue, but as a key part of the economic infrastructure.
U.K. House Prices Fall 1.9% as Recession Deepens, Halifax Says

Halifax in the UK reporting a decline in house prices as the recession deepens. A steady housing market in the UK is key to overseas property markets, as British and Irish buyers have been main drivers of the property boom in Spain and elsewhere. Send us an enquiry for a quote from Halifax in Spain.

April 3  U.K. house prices declined in March as the recession deepened and unemployment rose, Lloyds Banking Group Plc’s Halifax division said.
Prices fell 1.9 percent from February to an average of 157,326 pounds ($232,000), the mortgage lender said today in a statement. From a year earlier, prices dropped 17.6 percent.
Chancellor of the Exchequer Alistair Darling said today that unemployment is likely to keep rising after the economy suffered a severe downturn. Prime Minister Gordon Brown has offered credit guarantees to Royal Bank of Scotland Group Plc and other banks to encourage them to revive lending and support economic growth.
“Increasing unemployment, low consumer confidence and the constraining effects of the continuing dislocation of the financial markets on the availability of mortgage finance are all likely to exert downward pressure on the market over the coming months,” an economist at Halifax, said in the statement.
The Bank of England cut the benchmark rate to a record low of 0.5 percent last month and started to buy bonds with newly created money to stimulate the economy.
The U.K. economy shrank 1.6 percent in the fourth quarter, the most since 1980. The Organization for Economic Cooperation and Development forecasts British GDP will fall 3.7 percent this year.
Today’s report contrasts with figures yesterday from Nationwide Building Society, which said house prices unexpectedly climbed 0.9 percent last month. U.K. banks may start lending more to consumers and companies in the next quarter after interest rates fell and funding loans became easier, a survey by the Bank of England showed yesterday.

Signs of the UK mortgage market improving, which is key to Spain. If people in the UK can remortgage to better deals then they will have more cash available to service their Spanish mortgages, so defaults should slow down. Ability to release equity will also enable savvy UK buyers to pick up some good value Spanish property.

UK's mortgage market is improving, expert says
There are signs that the UK's mortgage market is improving, according to one industry practitioner.
Charles Davis, senior economist at the Centre for Economics and Business Research, stated that there are "tentative" indications that the recent reductions in the UK's base rate of interest are having a positive impact.
He made his comments in response to recent Bank of England figures, which revealed that mortgage approvals rose by 19 per cent in February this year compared with the previous month.
The Bank announced that 37,937 mortgages were approved in February 2009, whereas 31,791 were approved in January.
Mr Davis described the percentage change as "quite large".
The expert added: "[The figure] also comes at a time when we have seen some pick up in interest and enquiries in the housing market."
However, he went on to state that the mortgage market is still at a "relatively low level" compared with the months which immediately preceded the credit crunch.
3 April 2009
The recovery of the European property markets relies firmly on governments to solve the mortgage credit shortage, according to a study.
Demand for homes across Europe fell dramatically last year due to the credit crunch and global economic downturn, according to a report by Professor Michael Ball of Reading University.
Ball’s report reveals that property prices in the Baltic States experienced the sharpest falls, with Estonia down 23 per cent, followed closely by the UK, down 16 per cent, Ireland down 9 per cent and Norway dropping 8 per cent.
In Germany and Austria, demand has slowed due to a lack of credit and further moderate property price falls are expected in 2009.
Meanwhile in Italy sales fell for the first time in over a decade due to a fall in mortgage lending last year.
The report warns that the worsening global economic climate will lead to a further deterioration in the Spanish second homes sector.
In Central and Eastern Europe, the financial turbulence hit residential markets extremely hard; In Hungary transactions fell by 10 to 15 per cent in 2008 and property prices also dropped in Poland.
Continued mortgage constraints and the rising cost of foreign currency loans may lead to further falls.
In France, transactions of existing homes fell by 30 per cent in 2008 and prices are expected to continue to slide in 2009.
Property prices fell in the Netherlands and Belgium, following the nationalisation of some of the major mortgage lenders in those countries’.

2 April 2009
Spanish mortgage interest rates have continued to rise, despite the fact that Euribor - the rate normally used to calculate mortgage payments in Spain – has fallen briskly to it’s lowest level on record, according to the National Institute of Statistics (NIS).
The latest NIS figures released for January shows that the average mortgage interest rate that month was 5.64%, up 1.1% compared to December 2008. This is in spite of the fact that the Euribor dropped to 2.622% in January, down 24%. It is estimated that the Euribor fell to around 1.9% at the end of March, the lowest level ever.
Banks are clearly profiting from higher mortgage interest rates by not passing on any of the savings from a falling Euribor in an attempt to balance their accounts.
NIS research further reveals that the volume of new mortgages approved to buy property in Spain declined by 43.5% on an annual basis to 53,000 in January, culminating in a 52% year on year fall in the overall value of new home loans, while the average mortgage value fell 14.5% to €122,000 (£112,000). New mortgage approvals have fallen for 19 consecutive months, and are now 20% lower year on year. Send us an enquiry and benefit from the falling Euribor.

Signs of the mortgage market in Dubai picking up, where things have arguably been worse hit than in Spain.

HSBC Raises Loan-to-value Ratio to 75 Per Cent

1 April 2009
DUBAI - HSBC Bank Middle East Limited has raised the loan-to-value ratio for mortgages from 60 per cent to 75 per cent as part of a move to encourage end-users to buy homes, the bank said on Tuesday.
The move is expected to give UAE’s flagging real estate sector a much-needed fillip while providing more flexibility to end-user market, a bank spokesperson told Khaleej Times.
By increasing the loan-to-value, or LTV ratio, the bank hopes to attract more homebuyers who need to make a down payment of 25 per cent of the value instead of 40 per cent, the spokesperson said. “It will make life easier for buyers who are looking to own a home and give them more flexibility and choice.”
HSBC continues to be a responsible lender and as such the offer is primarily targeted at end-users who have recently faced acute difficulties getting affordable mortgage finance,” said Abdulfattah Sharaf, CEO of Personal Financial Services of HSBC Middle East.
Sharaf said the increased LAT would be made available on HSBC’s Flexi-Loan and EIBOR- (Emirates Inter Bank Offered Rate) based mortgage products as well as on the bank’s Amanah Home Finance.
“In this challenging economic environment our flexible and transparent mortgage products will help customers to know where their interest rates are heading, allowing them to budget accordingly,” added Sharaf.
The Flexi-Home Loan also offers a variable interest mortgage rate and the adjustment of the rate is based on the discretion of the bank and market conditions. This rate is also reviewed every quarter, he said.
HSBC mortgages are available to expatriates and nationals with loan terms of up to 25 years or until the age of 65, which ever occurs first.
To qualify for a loan to purchase a property, the minimum salary requirement must be Dh20,000 and salary transfer is mandatory. Varying interest rates per annum start from 8.5 per cent.
The bank’s EIBOR “Tracker” mortgage offers customers 100 per cent transparency on pricing methodology and is benchmarked against the three months EIBOR plus a fixed margin depending on LTV, Sharaf pointed out. “The bank guarantees a rate review every quarter on 1st January, 1st April, 1st July, 1st October and the rate will be automatically re-set in line with the actual current three month EIBOR rate.”
Dubai-based Sherwoods Independent Property Consultants said they expected Dubai buyers to enjoy greater leverage in negotiating prices and payments with developers mainly due to strong competition from the secondary market, which has resulted in a broader range of investment options.
“Dubai property market dynamics will continue to shift in favour of tenants as more stock is introduced within the year. This general outlook has substantially redirected the real estate sector’s focus from supply to demand factors,” said Iseeb Rehman, Managing Director of Sherwoods.

UK homeowners pay off £8bn of mortgage debt
British homeowners are benefiting from the cuts in interest rates by paying off their mortgages in record amounts, figures showed today.
A huge £8bn of mortgage debt was repaid in the fourth quarter of last year, according to Bank of England figures, as Britons with tracker mortgages responded to the sharp fall in interest repayments by pumping the spare cash into paying off their capital.
It follows figures earlier this week showing record inflows of savings into building societies and data last week showing a rebound in the proportion of income people are saving, as those in employment take the opportunity to pay off debt and prepare for leaner times as the country sinks into recession.
And it contrasts with the position of those who do not own their own home, have not benefited from falling interest rates and, as shown by last week's surprise rise in inflation, have seen a rise in the cost of items such as food.
Karen Ward, economist at HSBC, said the people paying down their mortgages were almost certainly the 40% of homeowners who were on tracker deals and therefore would have been the main beneficiaries of the cuts in interest rates from 5% in August to an all-time low of just 0.5% now. Some of them would have seen their mortgage payments fall 80%, she added.
"In our view this is one important channel in which interest rates are working," she said. "Roughly 40% of the mortgages taken out in 2007 were trackers and so will have benefited fully from the decline in Bank Rate over the past 18 months. Because of falling house prices this money is being used to pay down debt rather than spent on goods and services."
The figures also reveal how homeowners are responding to major changes in the property market. Charles Wasdell, head of research at propertyfinder.com, said the value of Britain's housing equity had fallen to £2.2tn from a peak of £3.1tn in 2007.
"It should come as no surprise that households are paying back mortgages at an unprecedented rate," he said. "In the early 2000s many people treated their home like a cash machine, withdrawing over £300bn between 2000 and 2007. The focus now is on protecting themselves against falling house prices."
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: "This data demonstrates just how damaging the collapse in the housing market has been for the wider economy. The constraint on household borrowing from the loss in value of residential property contributed in no small way to the 1% decline in consumer spending in Q4.
"The likelihood is that homeowners will find it difficult to resume extracting equity from property for the foreseeable future. This will provide a further obstacle to a recovery in the economy."
Separate figures from pay specialists Incomes Data Services showed that an increasing number of people were seeing their pay being frozen this year. Its latest survey showed one in five pay deals concluded in the past month saw pay freezes, although the average fell only slightly to 3.4%. That came on top of news on Tuesday that many public sector workers would get a rise of only 1.5% this year.
Accountants UK Hacker Young said that cuts in bonuses and pay freezes would push the number of higher-rate tax payers down by 6% this year to 3.6 million, reversing a decade-old upward trend.
UK mortgage market is becoming 'more competitive'Lenders look to gain larger market share.
The UK mortgage market is becoming more competitive as it is unlikely the Bank of England will lower its base rate any further, one mortgage advisor has claimed.

According to Alexander Hall, lenders are now lowering their rates as "we know where we are" with the current base rate.

Andy Pratt, chief operating officer at Alexander Hall, said it is not surprising lenders are looking to be more competitive in the current economic situation as they do not expect the base rate to reach zero.

"As we know from the various stats out there on the mortgage side, business is not strong at the moment for the lenders, so what they are now trying to do is gain market share by making their products more competitive and obviously more attractive to consumers," he stated.

Recent figures from the British Bankers' Association revealed that 28,179 mortgages were approved in February 2009, a number which was up by 16.1% when compared with statistics from the previous month.

UK mortgage approvals rise for third consecutive month: Datamonitor



Mortgage approvals increase could lead to herald start of a turnaround

Alongside the news that the number of UK mortgage approvals has risen for the third month in a row, HSBC shareholders have backed a cash call from the bank, despite the problems faced by other banks with recent rights issues. While doom and gloom still shrouds the city, these could be early signs that renewed confidence among investors is starting to infiltrate the markets.

The British Bankers' Association (BBA) has announced that 28,179 mortgages were approved for house purchases during February 2009, representing a considerable increase on the 24,278 registered in January. Although, the figure still represents a 31% fall compared to February 2008, gross lending by the major banks rose to GBP3.9bn in February, up 9.8% from a year earlier. Meanwhile, at its annual general meeting, 99% of HSBC shareholders voted in favor of a rights issue of GBP12.5bn.

“Whisper it quietly, but two pieces of 'good news' emerging in quick succession represents something of a turnaround from the picture of economic doom and gloom in recent months”, says Roderick Logan, financial services analyst at Datamonitor. Logan explains: “Firstly, the increase in mortgage approvals follows on from an increase in buyer enquiries, which suggests that, on the demand side, potential buyers are no longer prepared to wait, and feel that house prices may not have much further to fall.”

Also, many consumers have responded to low savings rates by removing their money from savings accounts and may subsequently have decided to use them for a deposit on a house. On the supply side, although lending criteria remain tight there are still good offers for those who are able to able to stump up a deposit of around 25%. Nevertheless, it is worth noting that the number of mortgage approvals remains close to historically low levels and that it is too early to say whether this is a positive trend or purely a blip.

“Secondly, the approval by the vast majority of HSBC shareholders of the GBP12.5bn cash call suggests that investors have not lost total faith in the beleaguered banking system.” HSBC has prided itself on a policy of transparency during the crisis, and was ready to admit it had made a mistake in purchasing HFC, a key player in the US sub-prime loan market. Its apparent willingness to admit to its shortcomings may have helped the bank to maintain some credibility with shareholders.

Logan warns: “Although the two stories do not herald the end of the economic turmoil, they do offer a small ray of sunshine in these dark times. The road ahead may still bring more unpleasant surprises.”

The euro mortgage on our holiday house paid off our UK home loan
The surge in the value of the euro has been a costly blow for the owners of holiday homes in Europe, as the exchange rate has pushed up the cost of taking money abroad by almost a half in less than two years.
In 2007, it cost £675 to buy 1,000 euros to pay utility bills, local taxes and maintenance costs on homes on the Continent. At today's exchange rate it costs £952.
The stagnant property market and falling prices have also thwarted attempts by owners to sell up and cut their losses.
Fair exchange: Allan and Vanessa Snuggs were able to keep their French home by cleverly switching mortgages
However, a growing band of holiday homeowners has found a way to profit from the currency crisis by remortgaging their European property, switching the cash into pounds and using the money to clear the outstanding loan on their UK home, and even to buy property bargains in Britain.
'It used to be that buyers would remortgage their British home and pay cash for a place in Spain or France,' says Fiona Watts of specialist mortgage broker International Private Finance. 'Now they're doing it the other way round and cashing in on low house prices at home.'
The reasons are compelling: two years ago, €250,000 was worth £166,657, but today, with the pound at its lowest point against the euro, it converts to £229,358 - almost 40 per cent more. Mortgage rates in the eurozone are also low and expected to fall further, and the cash is tax-free.
Retired detective Allan Snuggs, 51, and his wife Vanessa, from Newark, Nottinghamshire, have made an astonishing £57,000 by remortgaging their four-bedroom detached house in the Vendee on France's Atlantic coast.
The couple made £57,000 by remortgaging the four-bedroom detached house in the Vendee on France's Atlantic coast
'A year ago we thought we'd have to sell it because the euro was rising so fast and our UK income, from Allan's police pension, bought fewer and fewer euros,' says Vanessa, 47, whose house is near the village of St Gilles Croix de Vie.
'But we remortgaged, paid off the £130,000 mortgage on our two-bedroom flat near Newark and left some money in a French savings bank that pays more than we'd get in the UK.' The couple bought the house, where they spend six months of the year, two-and-a-half years ago for €436,000, which at the time was equivalent to £294,000, but today that would have cost them £403,000.
'We've just taken out a mortgage with BNP Paribas at a rate of 3.75 per cent fixed for three months,' says Vanessa. 'After that it will be 1.5 per cent above the Euribor rate, which would currently mean we'd pay three per cent in total, but we'll effectively be mortgage-free for a year because we've put €15,000 in a French savings account and that pays four per cent tax-free.'
The remortgaging process varies across Europe, but in France it is slow, bureaucratic and costly - it took the couple four months and cost €4,500 (£4,215) in legal fees. It is also risky. While they were waiting for their money to come through, the euro suddenly weakened and they could see their profit slipping away.
'We finally got the money in the middle of January and if we'd exchanged it then we'd have lost about £13,000 of our profit, so we decided to keep it in euros until the exchange rate improved, and two weeks ago we switched it when the rate fell to 1.07,' says Allan. Since then, the pound has fallen even further but experts believe that other homeowners who want to remortgage need to act fast because the euro has reached its peak.
Bruce Borrie, of currency specialist Baydonhill, says the euro is likely to fall when the European Central Bank cuts interest rates to kick-start the economy. By the end of the year he believes £1 will buy about €1.25.
This could be good news for people like Allan and Vanessa: not only would their mortgage rate come down, but the cost in pounds of their repayments would also drop. It currently costs £934 to buy €1,000, but if the rate falls to 1.25, it would cost just £800.
By then, however, they might have another strategy.
'We might reverse the deal when the situation is favourable to take advantage of increases or decreases in the value of the pound,' says Vanessa.