Today we have had the pleasure of speaking to Katherine Walkerdine, Co-founder and Director of Mortgage Direct about her journey to setting up in Spain and how the industry has weathered the storm with Covid.
Katherine, who hails from the Midlands in the UK and her husband Kevin who is from Marlow in Buckinghamshire, met at University when they were 18 but they were destined to find each other again years later and lived together in London for about 15 years. Katherine worked in the financial services industry, specialising in investments, mortgage brokering, inheritance tax etc. and Kevin worked for a firm of actuaries. As both industries became more and more regulated, they decided they would take a break from the red tape, ‘upped sticks’ and moved to Valencia. They bought a property there and thoroughly enjoyed the America’s Cup in 2005 which happened to be hosted by Valencia that year. After extended sabbaticals and putting off going back to London, they decided to stay which is where the story of Mortgage Direct began.
So Katherine, when did you decide to set up Mortgage Direct?
After we’d enjoyed ourselves a lot and had thrown in our jobs in London, the question was ‘what next?’. Someone asked if we could help with mortgages and we were curious. Being a regulated mortgage advisor in the UK, I had best practice at heart and there was a real gap in the market to help English speaking property buyers in Spain, so we looked into it. On a personal note, Kevin and I had taken out a mortgage ourselves when we moved to Spain and we thought the process was pretty straight forward. The main problem for people based in another country and not fluent in Spanish was a) is it possible to get a mortgage and b) who would we talk to? So Kevin and I created Mortgage Direct, set up contacts with the banks (the lenders) and made a start in our local area in Valencia.
In the UK we were typically meeting clients face to face so we used this model to begin with in Valencia but quickly realised it wasn’t actually necessary to meet in person so we started to concentrate on areas where clients of a high net worth were buying like Ibiza, which is now a very strong area for us even today. Other areas where we do a lot of business are the Costa Del Sol, Barcelona and Costa Blanca.
How big is your team now?
We are now a team of 13 of which eight are active advisors. We have English, Dutch, German and Spanish speakers. We have also built a strong network of partnerships with estate agents which is crucial for generating enquiries.
What affect have the new regulations had on the way your team works?
Firstly, we are very proud to say we have all passed the mortgage qualification which is the new regulation that came in last year. We’ve just been given the license from the Bank of Spain and we are one of very few international foreign brokers to have the license.
Currency fluctuations are a problem with the new regulations. To explain, if a client is earning in a non-Euro currency, if the currency rate goes more than 20% against them, they can switch from paying the mortgage in Euros, to paying in their own currency. This is a perceived, high risk to the banks. So with some currencies seen as risky such as the Hong Kong or US dollar, they may not lend to buyers earning in these currencies. The good thing is we are always liaising with the banks and understanding what their stance is on the issue. Some banks may favour clients from certain jurisdictions over others, so for this reason we make sure we keep on top of this to help the clients get their mortgage across the line.
With the new regulation banks also have new obligations to clients e.g. they can’t force a client to take out their own life insurance policies or they will be penalised. However the banks are slow to pull into line on some of these new regulations but we advise our clients on issues like this as we go.
What countries do your clients come from?
In terms of our client origin, about 60% are British, 20% European, 20% non-European. The US market has really expanded and we have focused on that. Americans love using us because we are English speaking and they are used to using brokers in their own country so our service feels right for them.
What challenges has your business faced with the pandemic?
We saw a huge drop off when lock down happened and were unsure of what the consequences would be. Surprisingly, it’s really picked up with enquiries, where we have seen record months since lock down restrictions were lifted. The main problem has been clients not being able to travel to Spain. They really want to view properties in person although there have been virtual viewings happening. Places like Mallorca have been really affected where Coronavirus cases have been minimal and things were picking up but since the UK government stopped flights to Spain, and announced 14 day quarantine rules on returned visitors, this has caused a slump in these areas again. Some people have also decided they don’t want to buy in Spain anymore because they are worried about the situation.
In terms of the industry as a whole during lock down, banks have still been working and underwriters and notaries were open so the industry wasn’t as badly affected as we thought it might be.
On the positive side, it’s worth mentioning that those clients who had the 5-10 year plan of buying their dream property in Spain, are now viewing things differently with ‘life being too short’, and craving the outdoor lifestyle so are in some cases, bringing their dream forward. Cash buyers are also wanting to hold onto their cash because interest rates are so good and looking to mortgage rather than 100% cash purchase.
What are your key predictions for the next 12 months?
Banks are still lending because they have the funds, which is unlike the global financial crisis of 2007/8. The new mortgage law has affected lending for those not earning in Euros, with lower loan-to-values and restrictions on the type of mortgages available to non-Euro earners. As the economic impact of Covid-19 deepens over the next 12 months, we may see fewer international buyers, so this could encourage the banks to offer more competitive terms, or perhaps they may relax their restrictions a little.
Finally, after some record months of enquiries, the main concern for us has been whether these enquiries would convert into an initial fee transaction. During lockdown the enquiries were not converting but now we are seeing conversions starting to happen which is really positive for us and the industry. It was a real surprise to us because we didn’t think we would get to pre-Covid levels of interest.
Thanks Katherine for telling us your story and also for your insight into the mortgage industry in Spain today. We wish you and your team the very best with your business.