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Mortgage floor: 29% of mortgages have a minimum interest rate.

29% of mortgages taken out by Spanish families to finance the purchase of their home are subject to a mortgage “floor”, which means that when interest rates fall to a certain level, usually to below 3.1%, they do not benefit, according to a study drawn up by the Banco de España at the request of the Senate.

The Banco de España recognises that financial institutions use theses clauses to recover “the minimum costs generated by these products when interest rates change sharply”, and therefore it believes that “they are a factor which promotes financial stability, something which is in the public interest”. For this reason it affirms that “as long as the clauses are written in a clear, understandable way, they must be considered to be freely agreed upon by the parties” and “it would not be appropriate to classify them as unfair.”

The study found that 13 of the 49 banks which took part in the study systematically include this type of clause in their mortgages. Of these, 4 do not include a mortgage “ceiling” to protect clients against interest rate increases. Furthermore, the others admit that “in the majority of cases they do not provide individuals with effective protection against the risk of a rise in interest rates, as the mortgage ceilings are very high.”

 Credit:- www.spainsolicitors.com

Fuster & Associates

Citizens may now grant powers of attorney to act in legal proceedings free of charge, and without having to contract a notary.

The Judicial Office, which was inaugurated last week, will enable citizens to bring actions for debts of up to 250,000 euros through fast track proceedings.

Forget about going to the notary’s in order to grant a power of attorney when taking legal action. As from now you can grant a power of attorney to act in legal proceedings free of charge before the judicial notary public. This is one of the many improvements to the legal system that citizens can take advantage of as of yesterday, when the procedural law reform came into force and created the new Judicial Office. Nor is this the only reform. The justice system is starting to change.

The changes to the judicial system, which came into force last week, mainly affect the division of functions between judges and court clerks. The latter will perform all the tasks that do not strictly fall within the remit of the judges in order to reduce the judges´ workload and enable them to devote more time to issuing sentences. As from now court clerks may call witnesses, impose court costs, decide whether a claim should be allowed to proceed etc.

According to the Ministry for Justice, this change will not affect the rights of citizens but will instead speed up judicial administration and improve the quality of the public services that it provides.

For the time being however, citizens may not find that legal proceedings are much quicker. «Although some of the changes, such as the power of attorney to act in legal proceedings, have been implemented immediately, we will have to wait for the common procedural services to come into force before citizens can enjoy a judicial administration that operates using quality, efficiency, and rationalisation criteria in the provision of services », explained Javier Luis Parra, Chief Court Clerk of the High Court of Murcia (TSJ) last week. According to Juan Martínez Moya, President of the High Court of Murcia, the second stage of the reform will not be implemented until October of this year.

However a wide variety of reforms to the judicial system will be implemented before this date, including some which citizens will be able to use immediately.

One of these reforms increases the amount that can be claimed in small debts proceedings from 30,000 euros to 250,000 euros. As a result, citizens will be able to claim for debts up to this amount through very easy legal procedures. As Javier Parra explained « This type of proceedings make up the majority of civil actions, and increasing the amount that can be claimed greatly increases the scope of the proceedings, and therefore significantly enhances the legal system’s capacity to resolve this type of claim ».

Furthermore, the regulations regulating judicial auctions have been amended in order to establish an electronic bidding system, to be managed by the court clerk, provided that it is technologically feasible. This will allow bidders to participate in judicial auctions over the Internet without having to be physically present in the law court where the auction is taking place. This measure improves the justice system, «leading to greater transparency and publicity, and will ensure that better prices are obtained, while practices such as two people entering into a pact that can damage a third party will be prevented ». As remarked above, reforms that improve the justice system and prepare it for the future.

Credit: www.spainsolicitors.com

Fuster & Associates

From the 1^st July, 2 of the 3 categories of Spanish VAT will rise.

 16% to 18%

   7% to   8%

   4% (is to remain the same).

What does this mean for the Spanish Property market which is already struggling to survive the current climate?

It will certainly increase  the cost of buying and selling property and obtaining a mortgage in an already crippled market.

What is the government thinking?

Of course it will generate income for them but may push the market further backwards and no doubt they are hoping that prices will fall still further and generate increased interest from buyers and steady the industry but at what cost? More likely it will force more builders, promoters and agencies out of business with knock on job losses. The banks will come under further pressure and there will be many owners caught in the trap of having mortgages far greater than the value of their property causing an increase in repossessions as people struggle with their own economic crisis, losing jobs and putting more people on the bread-line.

Then there is the knock on effect for furniture and electrical companies and many other suppliers with steady drops in sales already recorded.

Buyers and Investors

No doubt there are people watching the situation with interest and for the general buyer now is the time to buy a property before the IVA increases and with so many properties available at low prices.

For the investor, they will probably sit it out and wait for rock bottom distressed sales and then pounce as the drop in price will by far outweigh the increase in purchase costs.

With the pound rising against the euro, buying a property is looking even more attractive.

Mortgages

As the banks continue to come under pressure they will negotiate on distressed properties in order to clear their overflowing books and are currently making mortgage offers which pre crisis would be unheard of.

If you have the money now is the time to buy Spanish Property.

Admin: 5 May 2010

Euribor, the interest rate normally used to calculate mortgage payments in Spain, rose 0.8% in April compared to the previous month, taking it back to 1.225% where it was in February. This is only the second time Euribor has risen on a monthly basis since September 2008.

Despite the rise in April, the Euribor is still just a fraction above the record low it hit in March. It is still 31% lower than it was a year ago and 77% lower than it was in July 2008.

Because Euribor is still lower than it was a year ago, repayments on a typical annually resetting mortgage (120,000 Euros, 25 years, Euribor +0.8%) will fall by around 41 Euros a month, or 420 Euros a year.

Many experts think that Euribor has fallen as far as it can and expect rates to start rising modestly. It won’t be long now before borrowers starting seeing their monthly payments rise, albeit a small amount.

Euribor is based on interest rates set by the European Central Bank. Base rates are currently at 1% but are expected to rise gradually during the course of 2010.

New mortgage lending

New mortgage lending rose 8.5% in February compared to the same month last year, according to figures from the National Institute of Statistics (INE). That is the second consecutive month of growth in mortgage lending, a good sign for the market.

On a monthly basis there were 54,813 new mortgages signed in February, up 6.2% compared to January.

The average loan value was 118,185 Euros, a fall of 4.6% compared to last year. Overall new mortgage lending was 6.478 billion Euros, up 3.5% on last year.

The average interest rate was 3.97, 26.5% below a year ago, and 2% lower than January.

95.7% were variable rate

Foreclosures also on the rise

Mortgage foreclosures increased 59% last year, up to 93,000, according to official data from the judicial system.

Mortgage foreclosures have progressed as follows in the last few years:

2009 – 93,000
2008 – 58,500
2007 – 26,000
2006 – 17,500
2005 – 15,500
2004 – 14,000

The greatest number of foreclosures last year were in Catalonia (18,000, 61% up), followed by Andalucía (17,700, up 55%), and Valencia (16,300, up 54%).

Credit: Mark Stucklin

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