Short Report on Spanish Banks

Rip off Merchants! Is that short enough?

Seriously last week I saw the ads for Deutsche Bank's mortgage rate at Euribor +0.27% Now this is a rather good rate so I went to talk with them. This actual offer may be valid for about a handful of people in Spain but you would have to jump through so many hoops that it really would be a major surprise if you got any mortgage through them at all not only the headline advertised rate.

I then went to BBVA. I asked for a friend about a personal loan to pay off a credit card and have a better interest rate. They quoted me 11-12% for a personal loan. Now Euribor is currently 1.8%. I understand that the interbank rate LIBOR stands between 4-4.5% and that there is not much liquidity at that rate so in order to borrow money to lend the banks need to offer a better rate but there is liquidity at 5%. Therefore offering 11-12% interest rate is profiteering ridiculously and taking advantage of their own customers. The usual rate on a personal loan in Spain is 3% above Euribor not 10% above.

Banco Santander on the other hand were very helpful and would expect to give mortgages to non residents at Euribor plus 1.2-1.5%. That is a great deal for new mortgages as it is below LIBOR. This means they are willing to take the risk on losing a little to start up with as the usual mortgage will make money for them over 25-30 years. The CAM also came up with decent rates as did Bancaja.

What does this tell us? You need to look around for any financial product at the moment because as long as you are a decent looking client incomewise then there is finance available.

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.