Food for thought…

As many readers may have heard or read in the news, after a 125 year presence on the Rock.  Barclays have announced they will cease their retail banking operations in Gibraltar towards the end of 2014 as part of their global review.

Whilst Barclays will still continue to offer its services to corporations and high net worth individuals, the question on most peoples lips, is “who will replace them on the high street?”

Prior to the full opening of the Frontier with Spain in 1985, the majority of local housing was provided by the Gibraltar Government and private ownership was relatively unheard of, but with the growth in our economy and Finance Centre, the property market underwent a transformation and the emphasis shifted towards private home ownership, which in turn led to the construction of the numerous residential and commercial developments that we see today.

In nearly all instances, the property developments that have appeared since the opening of the Frontier have only been possible with the financial assistance of institutions such as Barclays, who lent both to the developers and then in turn to the ultimate home-owners by way of mortgages.

When Barclays were in the mortgage market, a prospective purchaser’s options were limited, but there was nevertheless a wider choice between the lenders and that in part helped ensure competitive interest rates, but with the announcement that Barclays will cease offering mortgages, Gibraltar has, in one swoop lost one of the main providers of property finance on the Rock.

Whilst there is no reason to doubt the remaining lending institutions will continue to offer competitive mortgage rates, the departure of Barclays could potentially result in the remaining lenders being unable to cope with the number of mortgage applications and/or being unable to offer finance, simply as a result of having reached their lending quota on a given development.

Even when Barclays were offering mortgages there were instances when lending institutions were unable to offer mortgages due to being over-subscribed, and this lends weight to possibility that it could re-occur.

With nearly 9 out of every 10 purchasers requiring some form of finance to fund the purchase of a property, Gibraltar will undoubtedly require another pro-active financial institution to offer local mortgages and finance facilities for developers.  Will it be the Gibraltar Savings Bank or an outside financial institution with the foresight to see Gibraltar’s star potential?

Kind regards

Justin Bray