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Mortgage Negotiations in Spain


Would it surprise you to hear that Spanish banks are making excessive profits at the moment. The Euribor rate which is the rate which most mortgages are tied to is at a historic low, 1.9% this week, as interest rates in general have plummeted. For those people closely working with banks and renegotiating people’s loans so that they get a respite from the payments which rocketed last year and will stay that way until the next revision, life is quite difficult to understand. Tracking mortgages don’t exist as such. The Spanish system means that the banks reset your rate every year on the same date according to the previous month’s Euribor. The whole of the following year it remains set. So in a situation like the current one, where the interest rates have plummeted so quickly the variation between the actual Euribor rate and actual rates being charged is huge and growing.

All banks in Spain generally lend money at a rate above Euribor, the European base rate. Banks used to lend at Euribor plus 1%. The lack of liquidity means that the banks are not oenly lending. The collapse of interbank lending due to a lack of confidence between banks is critical. The major source of funds coming into the market are government backed securities. Easy to follow? In order to sell them they are having to offer around 5%. They also get money in by offering higher savings rates such as 4-5%. Borrowing therefore is done at rates much higher than Euribor. If banks lend currently they are looking at Euribor +2% rather than the more traditional +1%.

This means what then? If you currently have a mortgage in Spain then make use of it if you are selling. Here, the mortgage is levered on the property as opposed to the person. If you are selling a house make a selling point of the property having a mortgage on it at a good rate because that is now a major difference compared with comparative houses. High interest rates and penalties on new mortgage lending means that without your current mortgage being available for a buyer it is much more difficult to sell. Will the bank finance even a solvent buyer though, even one with an excellent track record and good salary.

For lifestyle and long term options therefore houses for sale in Spain are good assets to hold. However make sure you have money rather than needing all of the money from the banks.

To make sure you get the best information about properties to buy in Spain make sure to look at this site for Valencia Property.

 

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