Banks in Spain are profiteering 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. The policy of the banks is difficult to understand for those having to work with them as payments far outweigh the current interest rate. Tracking mortgages don’t exist as such. The Euribor rate from the previous month is the measure that banks use when resetting your rate. The whole of the following year it remains set. Thus the current situation of falling interest rate leaves the difference between Euribor and charged rates large and developing further.
Banks in Spain give mortgages out based on the Euribor, the European Base Rate. Ordinarilly banks have lent at Euribor plus 1% more or less. However no banks are currently lending openly as they have no money. The lack of confidence between banks has dried up lending between them. The only funds coming into the market are coming through government guarantees on bank securities they are selling abroad backed by mortgages. Can you see where this is going? In order to sell them they are having to offer around 5%. The other source of income is from depositors’ cash which they can only attract at around 4-5%. Borrowing therefore is done at rates much higher than Euribor. therefore lending at Eurbor plus 1% is now unknown, +2% or more is common.
What does this signify? Having a mortgage on a property is really useful if selling. Here, the mortgage is levered on the property as opposed to the person. Having a mortgage on a property is a major selling point now if it is set at a good rate compared with other houses for sale. 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. The only downside is whether your bank will finance the buyer, even if they have excellent credit history and a lovely high income.
Houses for sale in Spain remain a good long term option as the lifestyle in Spain is excellent still. 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.
