Fixed-rate mortgages gaining in popularity says 'El Economista'
Monday, February 9, 2015 @ 11:15 PM
With the housing market in Spain showing clear signs of recovery after seven years of recession, 'El Economista' has reported that a number of banks are trying to tempt buyers to change their habits and opt for American-style fixed-rate mortgages.
Banco Sabadell were first to promote the scheme, with mortgage rate fixed at 3.95% for 30 years. CaixaBank is now offering mortgages at 2.5% and 3% over a 10-year period. Both of these products break the mould in a country where 90% of mortgages have variable interest rates.
The one year Euribor, Spain's main reference index for variable-rate mortgages, has dropped dramatically from its 2008 rate of 5%, to just 0.3%, depriving the banks of one of its main sources of income from the 13.8 million mortgages drawn up during the housing boom decade.
"Banks have improved their balance sheets and in terms of capital are now in a better position than they were", said José Luis Martínez Campuzano, one of Citigroup's strategists, "but in a climate of low interest rates, they need to be more profitable".
The European Central Bank (ECB) lowered its interest rates from 0.15% to 0.05% in September, bringing the Euribor down, and the quantitative easing (QE) programme announced on January 22nd could keep base interest rates low for some time. Banco Sabadell is predicting that 20% of all its new mortgage business will be fixed-rate loans.
Read more at thinkSPAIN.com