NEW MORTGAGE ALERT

One of the main lenders to the non resident Spanish market has today announced a re pricing of all their mortgage products and basically they are putting chargeable pay rates up by 25 basis points (0.25%) across the board. They have historically been one of the most innovative lenders to the Spanish market and perhaps this is writing on the wall but from being highly competitive with long term interest only their pay rates put them a dismal second or third. When expressing concern at the move in that their competitive edge had been eroded there was a philosophical shrug of the shoulders almost as much to say they they are not sure whether they want the business.

Then again it seems to be happening everywhere and perhaps the last 12 years of squeezing margins for lenders globally has come to an end. I hear similar things in the UK and speaking to a friend over there today he seems to think an increase of .25% is insignificant alongside what is happening in the UK.

Would that be Solbank?

Guess again!!

No thanks mines with Sol so not bothered if some other changes rates!

If you have already completed then it wouldnt have any effects on you anyway

It would have in 12 months!

It would have in 12 months!

Ah no - if you have completed on the purchase the margin above Euribor is already set and that will be the chargeable margin for the life of the mortgage - Euribor plus whatever it is - its in the Mortgage Deed and as long as you comply with the terms of the mortgage that is how it will stay. However the lender in question has increased the margin they charge over Euribor. Thats not to say that Solbank wont change their margins in due course but if you have completed and already paying the mortgage it will have no effect on you.

I thought it was reviewed at each anniversary

As I understand it, and hope I am right, dependant on the mortgage, its the Euribor rate portion of the interest rate thats reviewed. The + Euribor should stay the same for the life of the mortgage.

As I understand it, the mortgage is reviewed on an annual basis to ensure that the repayments are set at the correct level in relation to the Euribor rate.

For example if, at the beginning of your mortgae you pay €500 per month for a mortgage at Euribor +0.5%, when Euriobor is say 4% then that has been calculated to repay the mortgage or cover the interest charges, whichever the case may be.

However, if say after 3 months, Euribor increases to 5% then the €500 is not going to be sufficient to cover the interest/capital.

It is similar to how the B/Socs in the UK used to do things a few years ago in respect of variable rate mortgages, which in effect a Euribor mortgage is.

Noreen

Right for lenders who calculate using the annual Euribor Superdon is absolutely correct in what he says. If the Euribor rate is 4.35 and the margin above Euribor is 1% the pay rate for the 12 months from the date of completion is 5.35%. On the one year anniversary the rate is set again so lets assume in 12 months time Euribor is 4% the new pay rate for the next 12 months is 5% and this continues for the life of the mortgage. This system is followed whether interest only or capital repayment so effectively it is a rolling one year fixed rate - thus 12 months stability at a time. There are those lenders that link to other benchmarks such as Euro repo rate and monthly Euribor, 3 monthly, 6 monthly or the IRPH (which seems to be going out of vogue - very loosely similar to SVR in the UK). Generally most (but not all) lenders use the 12 month Euribor so while the Euribor rate may fluctuate the margin above that remains the same for duration of mortgage.

I think Noreen what you are talking about is deferred interest which is I guess a little bit of a lottery in that we are going to charge you X but if the rates rise or fall during the specified period we will then adjust your payment to reflect the fact that either you owe the lender or the lender owes you interest - sorry if I am wrong in my interpretation. While there are a couple of lenders that have done that here it is highly unpopular owing to its lack of clarity and the fact it can create confusion - as if mortgages in Spain werent confusing enough already.