Spanish Banks & Building Societies have had to go through massive structural changes over the last seven years resulting in a large number of mergers and acquisitions in the market which have seen the number banks / building societies reduce from 55 to 15.
This is likely to reduce further over the next 2 years and so therefore it would be wise to look at who you are currently banking with. Being in the business during this transition period, FFA are in an ideal position to advise banking clients of which banks are really the safest and more client friendly so clients can then decide whether to change their current banking relationships.
From our experience we have seen many clients get unstuck because they are not dealing with the right banking institutions for their needs and this can easily be avoided by knowing what banks offer what which is where FFA can help you.
We are also assisting many client who are in dispute with their existing banking provider.
THE AREAS WHERE WE ARE ACHIEVE GREAT RESULTS FOR OUR CLIENTS ARE IN THE FOLLOWING:
Mortgage rate floors or Clausula Suelos on your existing Spanish mortgage
If you took out a mortgage with a Spanish lender before the credit crisis, the likelihood is that you have an interest rate floor clause within your mortgage contract meaning that you are not benefiting from current historically the low European Central Banks interest rate and therefore you have been overcharged by your Spanish mortgage provider.
Currently (15th December 2015) Euribor 12 month rates are set at 0.063% which is a record low. If you are paying well above this rate, it would imply that you have an interest rate floor meaning the minimum interest cannot go below a certain level. In most cases this can range between 3.5% – 5%.
Therefore, if your mortgage contract states that your margin above Euribor is 1.25 points above, you should in reality require to pay the bank an interest of 1.31% instead of the interest rate floor. This means that the bank are over charging you and you are entitled to a full refund.
If you take away the floor clause, you will also benefit immediately from lower monthly payments because you will be only paying interest on the reduced rate.
If you have this clause hidden within your Spanish mortgage contract, get in touch with FFA and we can explain how legally the banks are obliged to take away this clause and refund you the amount you have over paid. The Supreme court in Madrid have ruled that this clause is abusive but it isn’t forcing the banks to return the money overcharged meaning that it is down to each individual has to make the complaint to the bank in order to get the clause rescinded. If you do not issue proceedings, your bank will never inform you of the court’s decision and therefore continue to over-charge you.
Take action and don’t let the banks get away with what basically is robbery in this case, contact us to see how we can help.
** Update** 18.01.2017
The European Court of Justice ruled that Spanish Banks miss-sold mortgages to consumers by including an interest rate floor or clausulas suelos, into a large number of mortgage contract dating back at least 15 20 years.
With central bank interest rates at historic lows, Spanish mortgage holders are finding that they are NOT benefiting from these low rates due to the minimum rate clauses which were inserted into the original contracts, meaning that banks are keeping the extra cash themselves and not passing the reduction in interest rates to their customers. The ECJ has ruled that this is unfair and that full refunds are due which is great news for Spanish mortgage holders past and present.
The problem we now have is that the ruling has to be implemented by the Spanish government who seem to be heavily influenced by the banks and they are bringing out a decree which you can read about following this link – http://elpais.com/elpais/2017/01/18/inenglish/1484748511_696040.html
My take on the decree is the following:
Basically this is the deal with the floor clause and what the Spanish banks are obliged to do if you have one in your Spanish mortgage contract / deed.
The Spanish government will insist that the banks contact all customers who have a clausula suelo to inform them that they have a clause.
The banks have 3 months to make you an offer if they feel that the clause in the contract was miss-sold (they may argue it wasn’t).
If the customer accepts the banks offer then the deal is done and no further recourse is open to them if they realise that more cash could have been obtained.
Our opinion is that the banks offer will be well below what you are able to claim back as the Spanish government isn’t ensuring or controlling how the refunds are being administered.
Now remember, customers that are affected are entitled to get a full refund plus lost interest of 4% per annum.
If the bank offer a customer a lower refund and the client wants to get the full amount back then they will have to go to court which will take time and they will need a suitably qualified lawyer to go through the process in the correct way, this is where FFA can help.
The government is trying to find compromise between the Spanish banks and the general public which helps avoid a bank collapse, can you imagine if the banks there forced to return ALL the overpayments, with interest and legal fees within the 3 month period, then there would be a bank collapse in Spain – call us for a free, no obligation consultation.
Second chance mortgage rules or dación en pago
These rules / laws set down in 2012 were brought in to avoid reckless lending practices and unjust property evictions being instigated by unscrupulous Spanish lenders.
Basically the Spanish government stepped in to put a stop to lenders evicting hard working families from their houses, as the lenders themselves were probably the culprits of the glut of unaffordable lending practices that where common before the credit crisis occurred.
These rules apply in general terms to both Spanish residents and non residents alike and basically means that Spanish lenders can and will accept full payment of the mortgage / arrears and interest charges you took out on a Spanish property by handing back the asset / property and nothing else.
For an example – Mrs P, a UK resident and tax payer, bought a Spanish property at the height of the property market in 2006. She paid €350.000 and had a mortgage of €290.000 approved by Bank ABC at the same time. The property is now worth no more than €200.000 but Mrs. P still owes the bank €290.000 as she originally took an interest only mortgage. Mrs. P’s circumstances have changed due to separation from her husband and has had to reduce her working hours to look after the last of her dependent children meaning that she is no longer able to service the monthly cost of the Spanish mortgage.
Even though that she has €90.000 of negative equity based on the property value, the lender, Bank ABC have to consider repayment of the whole mortgage liability if Mrs. P request that the property takes care of the mortgage responsibility.
This means that you will receive a notarised certificate of full payment of the mortgage debt to the lender and that no further debts are attached to your name and NO black marks appear on any credit bureaus in Spain or anywhere else in the world. The bank will no further recourse over you.
How can this be you may ask? Well the simple answer is that the majority of Spanish banks asked central government for bailout money (handouts) otherwise they would have collapsed to the tune of 100 billion Euros (100,000,000 €) meaning that the Spanish tax payer ended up financing these bail outs and therefore the laws of second chance came into being.
If you have a Spanish mortgage which is unaffordable or seriously affecting your standard of living which you could do without, make sure you contact us to see how a return of the asset as payment in full of your debts (dación en pago) could work for you.
Don’t be afraid to make the change if you are not happy with the service you are currently getting.
GENERAL FINANCIAL ADVICE
As qualified financial advisers we are in a position to understand your financial planning needs.
In a constantly changing world and with all the turmoil within the global financial markets, we believe that it is in our client’s best interests to review their financial position on a regular basis as changes in local and international laws mean that clients may find that they are unnecessarily financially exposed.
FFA also has specialist collaborating companies who can give more specialist solutions if required.
Areas we can cover are:
- Pension planning for resident or non-residents
- General saving and investment advice
- Tax planning for residents and international clients
- Legal assistance