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View Full Version : Euribor rate is dropping fast which translates into lower monthly mortgage repayments



Lawbird Lawyer
12-30-2008, 09:45 AM
The Euribor rate is the reference which most Spanish Lenders take to set the mortgage rate of interest. This rate is revisable depending on your Mortgage Deed every six months or once a year.

Due to the recent Monetary Policy followed by the by the European Central Bank (ECB) to drop interest rates this is indirectly affecting the Euribor rate.

The Euribor rate is the rate of interest at which banks lend to each other. It is not governed by the ECB but on lowering the official rates of interest it does affect it in due time.

In any case the continued policy of the European Central Bank to lower the interest rates over the last months will help to drive down the Euribor rate which is always news welcomed by everyone. Spanish banks will revise the Euribor rate and this in turn will lower your monthly mortgage repayments.

So for all those that are struggling to pay their mortgage loan and are considering defaulting you should be aware of this significant drop in 2009. I suggest you find out at your bank when the Euribor rate will be adjusted for your own particular case.

More on this subject. (http://www.marbella-lawyers.com/wordpress/steep-drop-in-euribor-translates-into-cheaper-mortgages/)

http://www.cotizalia.com/cache/2009/01/29/noticias_19_euribor_enero_media_mensual.html

Unregistered
01-08-2009, 08:42 PM
Hi
My mortgage was re set for the year on the 31st of December and has gone up to 6.341%. I thought the Euribor had gone down, so why is my mortgage going up?

Thanks

Lawbird Lawyer
01-09-2009, 09:42 AM
Dear Sir/Madam,

I have no idea, it should've gone down like the rest of the mortgages. Perhaps you missed a payment or were late paying it and they increased it as a penalty.

You should check with your bank and find out.

Mortgage repayments are going to go down significantly for every mortgage loan referred to the Euribor in 2009 when the lender resets the applicable rate of interest (every six months or annually).

Marta
01-09-2009, 02:59 PM
Hi!

You need to check with your bank whether your mortgage is revised once or twice per year, as well as finding out which month's Euribor average rate they will take into account when calculating your monthly repayment. Although the Euribor rate has dropped very fast, if you happened to sign your mortgage deed in December then the bank will have taken the previous month's Euribor average rate ( November) or even the one before that ( October). For example, I signed my mortgage on the 5th of December two years ago. For my annual mortgage revision, as I signed before the 15th of December, the bank have taken October's Euribor average (5.25%) instead of Novembers ( 4.35%). So sadly instead of finding that my mortgage repayment has dropped.. it has raised by 105 EUR!!! :eek:

ifv
01-26-2009, 12:08 PM
For those who can read Spanish, here is an interesting article about the subject:

Miles de hipotecados seguirán 'pillados' por las subidas del Euribor mientras éste baja y baja (http://www.elmundo.es/elmundo/2009/01/22/suvivienda/1232653040.html) - Diario El Mundo (23/01/2009)

Unregistered
01-28-2009, 09:26 PM
I am trying to understand all this. My husband is Spanish and I don't want to put him down or anything but he seems to have the attitude of 'they are the bank and they know best'. I am spoken to by them as though I am completely irrelevant and they talk over me and any questions I have....

We have a mortgage of 115,000 costing 706 euros a month at 4.88% and for another 27 years. Our yearly revision is in July.

Could we watch the Euribor rate and wait for a month where between the dates 1 and 5th of that month the rate is low and then use the new law of a free extension of the mortgage up to the maximum we can two months after the lower Euribor rate. My husband is 31 years old so would it be until he is 60 or 65? If we then sign for this extension of the mortgage time in a notary, which is free I have read, would the rate for the Euribor be from the previous 2 months - a time which we have noted is a lot cheaper than our 4.88% we have now. Or would our Euribor rate be fixed to July still?

The bank manager keeps telling us to wait until July but I believe that if we extend the mortgage sooner and lower the monthly payments we will save more money on the next six months payments than we would do if the rate is a slightly bit lower in July for the forthcoming year?

Can the bank decline the request for an extension? We understand that the extension will mean that our mortgage will cost more but I keep on trying to say to the bank manager that we want to sell the flat... but realistically this won't be for two, three, four or maybe five years time. We don't want to be paying the mortgage on the flat in thirty years time as we want to sell it. We want and need (!!) to pay less each month now to be able to survive. We cannot become bankrupt as the mortgage has my father and mother-in-law as guarantors so the bank would make them pay and that is something we would never allow to happen as it would not be fair. We therefore want to keep paying but want to pay less each month until we are able to sell the property.

I feel that the bank are putting up a bit of a wall and just want to make the most money out of us. I have noticed recently extra '9 euro' maintenance fees which didn't appear last year, or 2 euro to transfer between two accounts. Also my request to cancel the paper in post bank statements came back with a no, they are automatic. We check them online so why do we have to pay 31cents each to receive them in the post to England?

Why are the banks trying to grab as much money from the poor customers as they can....they were the ones who gave out mortgages overvalued at 40,000 euros above and then wonder when those people do a runner with the cash the banks are left with the debt. The Spanish banking system makes me very, very angry.

I just wonder if anyone knows whether we can then ask to extend our mortgage soon, say in March and therefore gain the low Euribor rate from January as well as lower payments due to extending the time frame from 27 years to 35 or even 40 years?

Lawbird Lawyer
01-29-2009, 10:09 AM
I am trying to understand all this. My husband is Spanish and I don't want to put him down or anything but he seems to have the attitude of 'they are the bank and they know best'. I am spoken to by them as though I am completely irrelevant and they talk over me and any questions I have....

We have a mortgage of 115,000 costing 706 euros a month at 4.88% and for another 27 years. Our yearly revision is in July.

Could we watch the Euribor rate and wait for a month where between the dates 1 and 5th of that month the rate is low and then use the new law of a free extension of the mortgage up to the maximum we can two months after the lower Euribor rate. My husband is 31 years old so would it be until he is 60 or 65? If we then sign for this extension of the mortgage time in a notary, which is free I have read, would the rate for the Euribor be from the previous 2 months - a time which we have noted is a lot cheaper than our 4.88% we have now. Or would our Euribor rate be fixed to July still?

The bank manager keeps telling us to wait until July but I believe that if we extend the mortgage sooner and lower the monthly payments we will save more money on the next six months payments than we would do if the rate is a slightly bit lower in July for the forthcoming year?

Can the bank decline the request for an extension? We understand that the extension will mean that our mortgage will cost more but I keep on trying to say to the bank manager that we want to sell the flat... but realistically this won't be for two, three, four or maybe five years time. We don't want to be paying the mortgage on the flat in thirty years time as we want to sell it. We want and need (!!) to pay less each month now to be able to survive. We cannot become bankrupt as the mortgage has my father and mother-in-law as guarantors so the bank would make them pay and that is something we would never allow to happen as it would not be fair. We therefore want to keep paying but want to pay less each month until we are able to sell the property.

I feel that the bank are putting up a bit of a wall and just want to make the most money out of us. I have noticed recently extra '9 euro' maintenance fees which didn't appear last year, or 2 euro to transfer between two accounts. Also my request to cancel the paper in post bank statements came back with a no, they are automatic. We check them online so why do we have to pay 31cents each to receive them in the post to England?

Why are the banks trying to grab as much money from the poor customers as they can....they were the ones who gave out mortgages overvalued at 40,000 euros above and then wonder when those people do a runner with the cash the banks are left with the debt. The Spanish banking system makes me very, very angry.

I just wonder if anyone knows whether we can then ask to extend our mortgage soon, say in March and therefore gain the low Euribor rate from January as well as lower payments due to extending the time frame from 27 years to 35 or even 40 years?

Dear Madam,

Further to your queries:

1.- As you've already read in our website a law came out by which the extension, no other modification, of the mortgage repayments is free for the borrower. For more details on the law just follow this link (http://www.marbella-lawyers.com/forums/showthread.php?t=49) and scroll downwards.

2.- Regarding your July revision it will depend on the clauses of your own Mortgage deed. As stated in other replies to similar queries (http://www.marbella-lawyers.com/forums/showthread.php?t=149) banks usually takes the average Euribor of the two months prior to resetting your annual mortgage interest. So if yours resets in July it would be fairly common to assign as reference May's average Euribor rate.

Unregistered
01-29-2009, 04:10 PM
Thank you but I am still confused. Maybe I don't understand fully the translation in that link.

I thought that if we sign in the notary the extension (and is this only an extension maximum of 2 years?? or is that 2 years is the timeframe from now to extend? my husband is not here at the moment to translate fully) that it is classed as a new mortgage/escritura and therefore takes on the Euribor rate of the previous two months? Is that another clause and would be payable by a fee or would it be an automatic benefit of extending the mortgage at this time?

ie: if we asked to extend our mortgage in April, they would extend the years in which to pay and therefore we would have lower monthly payments but also the payments would be even lower again because in signing this extension in April, and therefore having a new escritura? it would be a much lower interest rate from February (as from watching the rate it should be very low between 1st and 5th February). Therefore a double bonus for us?

Or, we change the years to pay the mortgage and wait for July to have the interest rate changed.

You ask about our mortgage terms.... if I could get any sense from the bank I would be able to tell you that I know what they are.. But, my husband didn't use a lawyer (big, big mistake we now know!!) and just signed what they told him to. The guy who 'helped' us get the big mortgage wrote out cheques to himself and also charged 3000 euros in commision for the privilage. We won't get this money back but I would like to gain a slight benefit legally now from the lower interest rates!

Thank you for all your help as i've felt so helpless in this matter for so long!

Lawbird Lawyer
01-29-2009, 06:22 PM
Dear Madam,

The two years are the deadline the law offers to extend the mortgages freely, after the 22nd of April 2010 you will no longer be able to opt for this gratis.

Personally I do not like recommending to extend mortgage repayments as you will pay overall dearly for this privilege on the long run. If the bank provided you excell spreadsheets on both options you would be able to compare clearly what I'm refering to.

However, as you happen to mention that you want to sell on this property and all you are interested in is in lowering the monthly repayments then its certainly an option to consider.

The questions you are asking me are not strictly of a legal nature, rather they are of a financial nature so as to optimise your monthly repayments.

Once your mortgage resets in July 2009 you are going to see a very significant drop in your monthly repayments.

Unregistered
02-07-2009, 12:59 AM
Hi!

You need to check with your bank whether your mortgage is revised once or twice per year, as well as finding out which month's Euribor average rate they will take into account when calculating your monthly repayment. Although the Euribor rate has dropped very fast, if you happened to sign your mortgage deed in December then the bank will have taken the previous month's Euribor average rate ( November) or even the one before that ( October). For example, I signed my mortgage on the 5th of December two years ago. For my annual mortgage revision, as I signed before the 15th of December, the bank have taken October's Euribor average (5.25%) instead of Novembers ( 4.35%). So sadly instead of finding that my mortgage repayment has dropped.. it has raised by 105 EUR!!! :eek:

My mortgage went up after a year's fixed rate to 1.25% above the eurobor. When it went up it went up to 6.25%!! UGGHH!! Are you saying that I'm fixed with that rate for a whole year? The eurobor is really low now and it seems wrong that I'm paying SO much interest.

ifv
02-07-2009, 05:07 PM
I'm afraid this is the way it works. You will be stuck with this rate for a whole year. You have two options:


Talk to your bank and ask for your mortgage to be revised every 3 months (probaby useless, as banks are seldom helpful)
Take your mortgage somewhere else (provided you find a bank willing to offer you better conditions, which might be not that easy at the moment). Not only you will be reducing your 1.25% margin rate, but also the Euribor will be that of the month the binding offer is issued. This has a cost of 0.5% subrogation fee, plus around an extra 0.5% for notary an registry fees, and lawyers fees of 0.5% (in total 1.5%). At the current rates, you would be paying around 3% less on the principal on your first year (1.5% after costs). On a mortgage of, say, €300,000, the savings would be of €4,500. The worst that can happen is that, upon receiving the binding offer, your current bank matches it to prevent you (by law) from leaving.
Marta (our mortgage expert) may be able to offer further advice.

Lawbird Lawyer
03-04-2009, 04:41 PM
My mortgage went up after a year's fixed rate to 1.25% above the eurobor. When it went up it went up to 6.25%!! UGGHH!! Are you saying that I'm fixed with that rate for a whole year? The eurobor is really low now and it seems wrong that I'm paying SO much interest.

Adding to ifv's reply not only will you be stuck for the rest of the year until your next interest review with that interest rate.

Additionally many lenders include clauses in the Mortgage deed by which you cannot pay less than a minimum amount of interest (to which the differential usually averaging 1% for non-residents must be added).

The same as Mortgage deeds are capped with the maximum amount of interest payable (normally it's around 10% p.a. max) there is also a limit as to how little you can pay interest (a minimum payable interest rate).

When I started this thread it was done with the intention that borrowers realized that within the next months on their interest rate resetting they were going to pay considerably less a month. But some borrowers have been carried away and are now expecting to pay on their next review less than 2% or 3% p.a. interest and many of them are set for a nasty surprise as this will just not happen.