By the end of July 2009 the Euribor (“Euro Internbank Offered Rate”) closed at an astonishing 1.41%, reaching its lowest level since the introduction of the Euro in January 1 1999. In many European countries, and also in Spain, the Euribor is the most important gauge for the level and development of private mortgage interest. Since long fixed interest terms in Spain are rare, one should think that now is the time for everybody to fully enjoy the dropped Euribor rates. However, for many property owners it will only partially be the case.
Most Spain banks apply a minimum interest rate in their mortgage conditions. This interest ´bottom´ is usually fixed at a Euribor somewhere between 3 and 4%. Below that level, interest is no longer linked to the Euribor and stays unaltered, regardless whether Euribor continues to drop further.
The Spanish association for consumer interest in banking and insurances, Adicae, estimates that between 50 and 60% of all Spanish mortgagees signed for such bottom rate clauses. Adicae´s chairman has announced court cases as they believe these clauses to be null and void and contrary to consumer protection. A relevant aspect to that is the fact that it deals with standard clauses of which the great majority of the people is not aware and which are never subject to explicit negotiations upon signing the mortgage. |
