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Spanish mortgages down again as Euribor hits minus figures for the first time ever
thinkSPAIN , Sunday, February 28, 2016

EUROZONE interest rates have fallen into negative figures for the first time in history, bringing mortgages in Spain and other common currency nations down to their lowest ever.

The first time since the euro came into circulation that its interest rate, the Euribor, dropped below zero was on February 5 this year, when it plummeted to -0.002%, and it is expected to end the month on -0.007%.

Its lowest-ever was registered on February 22, when the Eurozone interest rate plunged to -0.018%.

Contrary to speculation, this does not mean those who have mortgages or loans will get money back, but it will mean the part of their repayment which represents capital interest will be as low as it will ever get.

For a typical mortgage of €120,000 over a 25-year term with a rate of Euribor + 1%, the monthly saving will be around €14, or €172 a year.

The Bank of Spain will confirm this officially in the first few days of March.

In light of this unprecedented situation, a debate began as to whether customers whose mortgages came up for annual review at a time when rates were in negative figures would be given refund.

But chairman of the Spanish Banking Association José María Roldán said paying people for borrowing money would be a 'contradiction in terms' and 'neither healthy nor sustainable'.

The Bank of Spain is considering applying a 'zero clause' to all new loans and mortgages which means the minimum Euribor interest rate will never go below 0%, meaning at the very least lenders would get a refund on the loans they had granted.

In practice, most loans and mortgages are based upon the Euribor plus a given percentage, ranging from 1% to 4% or 5%.

Lenders are also heavily pushing fixed-rate mortgages, which are not common in Spain as interest rate reviews are annual, meaning homeowners have plenty of time to follow trends in the economy and make decisions if a rate hike threatens – something they have not had to worry about in around eight years, as the Euribor has been consistently falling since its highs of around 5.3% in 2007.

At present and according to the National Institute of Statistics (INE), a total of 90.2% mortgages in Spain are on variable rates.

Last year, the number of new mortgages granted went up by 19.8%, reaching a total of 244,827 – the second year-on-year increase after six consecutive years of falling.



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