Spanish Mortgage Holders Set to Receive Billions From Banks in Repayments

Spanish Mortgage Holders Set to Receive Billions From Banks in Repayments

Greedy Spanish banks have to pay Billions

which is Great news for mortgage holders in Spain

Around 2.5 million mortgage holders in Span could find themselves receiving rebates up to thousands of euros after a ruling by the European Court of Justice (ECJ) last week that some Spanish banks issued “unfair” mortgage floors clauses that went against European law, and any money raised from these mortgages should be returned.

This ruling will likely affect customers who got their mortgage from the leading Spanish banks such as Banco Popular, Banco Sabadell, Caixbank and BBVA. Analysts have suggested that banks have set aside an estimated €4.5 billion to pay back their clients.

The issue is all about the “floor” clause that was made a part of many Spanish mortgages. It gave variable-rate mortgages a minimum interest by placing a limit in how much mortgage payments could be reduced by alongside the benchmark rates, which was the Euribor rate for many of the banks in Spain.

The Euribor rate has dropped to historical lows since 2008, but when a mortgage holder had a “floor clause” attached to their mortgage it meant that they were still making repayments that were higher than the benchmark rate, meaning that they were unfairly losing out to the fluctuations of the property market.

This ruling is unable to be appealed and came as a bit of a shock to the banks, as the ECJ saying that there would be no time limit for reimbursements. As such banks really could need to pay back over €4.5 billion in rebates.

The decision to backdate the rebates to May 2013 was made by the Spanish Supreme Court to protect the banking sector as it continues to recover from a double-dip recession. However the ECJ clearly felt that banks have not done enough to protect their customers, which is why the ruling was made that floor clauses are illegal and that reimbursements must be paid.

One mortgage holder revealed in an interview with Bloomberg that he would be receiving a €6,000 rebate, which is about the figure the other 2.5 million customers with these illegal floor clauses can expect.

While many homeowners will be receiving a welcome little windfall as they recover from the festive period the same can’t be said for the banks. Some members of the banking sector had hope that the Supreme Court would step up and halt the repayments to protect the industry because of the exceptional circumstances, but the ECJ took the stance that customers should come first.

This ruling is another step in the right direction for transparency and maturity in Spanish banking and property. While it took far too long to get the repayments issued, the ECJ should be applauded for taking the steps they have.

Spanish Banks Could be Forced to Reduce Prices on Repossessed Properties

Spanish Banks Could be Forced to Reduce Prices on Repossessed Properties

The Spanish government recently introduced a new rule that could see Spanish banks forced to lower the prices on properties that were repossessed during the recession. The new law was introduced on October 1^st and it will banks forced to reduce their exposure to Spanish real estate.

Spanish banks found themselves the largest landlords in Spain during the recession of 2008 – 2012 as they possessed a number of homes following mortgage holders being unable to keep up with repayments.

Many banks also took the chance to purchase unfinished properties from developers that sold them off cheap to escape, or as a result of, bankruptcy.

All of this led to price suppressions across Spain as banks were eager to get these properties off of their books. Following the stabilisation of the housing market in recent years banks are now following suit with everyone else and are pricing their assets at current market rates.

The Bank of Spain would still like to see the Spanish banking sector take steps away from the real estate market and let the real estate market become an independent industry again. Many property experts feel that this could cause many costa del sol low-price and reduced offers as the Spanish banking regulator clamps down as the fastest way to get rid of a property is to sell it at a reduced price.

Spanish Property Insight founder Mark Stucklin said that if banks are forced to offload their properties then it gives them the freedom to offer lower prices. Even though the Spanish banking sector is still continuing to offload assets they remain a large part of the real estate market and Spanish banks controlled around €84 in property assets at the end of 2015.

It’s likely that consumers will welcome the news. Spanish property prices have stabilised recently and there are places where prices have even risen. As such many would welcome some low-priced homes entering the market and giving the industry a shot in the arm by providing many Costa del Sol property bargains for first time buyers looking to get on the property ladder.