Spanish banks start to protect themselves from the negative Euribor
January 2016 closed the month with the Euribor at 0.044% and at the beginning of February, the mortgage reference rate hovered around the 0.03% mark.
All talks of the Euribor entering negative figures and what this would mean for clients with a mortgage and the issuing banks was still only hypothetical at this time.
However, last week, much sooner than expected, the Euribor fell below 0%, (-0.002%) which has now sent banks into a frenzy.
In theory, this now means that with interest rates in negative figures, the banks should start to pay their customers who are due a mortgage repayment review money back.
But, the banks are making it very clear that this is not going to happen and they will not pay anyone money for having taken out a loan with them.
President of the Spanish Banking Association (AEB), José María Roldán, was already noted as saying that it would be insane, unsustainable and unreasonable for the person taking out a loan to get paid and for the one lending the money to pay it.
He also suggested that it is necessary to seek out legal advice to find out exactly what should happen in this situation.
Nevertheless, before a final decision is made, some banks are already beginning to take measures to protect themselves in the future just in case things don’t go their way.
According to Cinco Días, at least three entities (Caixabank, Liderbank and Oficina Directa) have incorporated a new clause into any future mortgages taken out whereby the lowest interest rate applicable would be 0%.
This would allow mortgage holders to benefit from the negative Euribor rate by, in the best of cases, not having to pay any interest on their loan, but it would also protect the moneylenders from having to pay any money back to them.
At the moment, other banks such as Santander, Bankinter or Banco Popular haven’t included a similar clause into their new mortgage-lending portfolio, but it is believed that they are working on rewriting their contracts so that it becomes clear that any loan taken out must be paid back in full, despite what happens to the interest rates.
While it is unlikely that Spanish banks will be made to pay their mortgage clients back any money, consumer rights organizationOCU has warned that it will take all the necessary legal action to ensure that the moneylenders fulfil their part of the agreement if interest rates continue in negative figures.