Thursday, February 19, 2009

Banks, Interest Rates, Mortgages and House Sales

I am closely working with some banks at the moment renegotiating people's loans so that they get a respite from the payments which rocketed last year and stay that way until the next revision, 12 months after the last in Spain as Trackers don't exist.

All banks in Spain generally lend money at a rate above Euribor, the European base rate. Euribor today stood at 2.08% and traditionally here banks lend at around Euribor +1. However no banks are lending as i said in my last blogs, they have no money as interbank lending has collapsed due to the lack of confidence in the market. 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%. Therefore all money they are borrowing they are getting at rates well above Euribor. thus they will not lend it at Euribor plus rates or if they do the plus is now +2% or more.

What does this mean? If you have a mortgage in Spain then make use of it, remember the mortgage stays on the property not with the person here. If you are selling a house make use of the property having a mortgage on it at a good rate because that is now a major selling point. Without that mortgage it is virtually inconceivable that you can sell to anyone other than a cash buyer because the banks will not give out new mortgages. The only downside, let's see if your bank will finance the buyer, even if they have excellent credit history and a lovely high income.

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