One sometimes comes across these “odd words” we use without really knowing thoroughly its meaning. It happens with more terms than we would like, for sure, but no one is “all knowing”. What we can try is to know better about everything that has anything to do with us and our business.
¿What is the EURIBOR? Is the Acronym of Euro Interbank Offered Rate, that is the price under which the banks lend money between themselves, and is published on a daily basis. This standard is obtained as an average of the interest rates charged by a selected number of European Bank Corporation (comprehensive list here) and comprises not only one figure, but a number of them, for the interest rates vary depending on the length and terms to return the loan (days, weeks, months, years, etc …)
How far are we concerned by this standard? Piece of cake … In the event of asking a bank for money, we will be charged depending on the rates the banks undergo themselves … But, and this is a paramount fact, the Euribor is the base rate for calculating the mortgage rates we are being charged … in case you have one!
Another term we are accustomed to, and directly related with today´s blog topic is “Ground Clause”. This is a concept addressed in a number of Changing Interest Mortgage contracts, these, to put it simply, are mortgages in which the interest to be charged by the bank for the money loaned depend on the performance of several indexes, the most commonly used is the EURIBOR. The Ground Clause states that the interest rates may fall up to a certain limit, once reached that limit the Mortgage shifts into a Fixed Interest Rate Mortgage (no falls from the agreed limit are permitted) allowing only upwards interest changes. These “Ground Clauses” were ruled out by the Spanish “Sala de lo Civil del Tribunal Supremo” on the past May 2015, in the event of the clauses were included in the “small print”, that is to say, not expressedly warned of (eg. displaying different products to assess the performance of the interest amounts to pay in different scenarios; or adding an appendix stating a “ceiling price” opposed to the ground clause)
Since the publication of the sentence, that set court precendence, a number of litigations have accomplished the refund of the unduly interest charges, as well as the putting out of the Ground Clauses from the Mortgage contracts, only in those where the court ruled a “lack of transparence” on the bank side when arranging the contract.
Do contact Marbella 360 so as to enhance the information supplied or to get in contact with law firms specialized in these procedures.
And now, back to the topic of todays blog entry: Euribor drops to a new low record. We are pleased to acknowledge the news, for they lighten the monthly charges to families along Spain (both nationals and foreign residents are to benefit from the fact) The figures might not appear significant but will mean a reduction in the monthly payments once the mortgage contract is reviewed.
A second thought, and slightly self interested, is the one we on the Real Estate business give to these news, as this low record should motivate the market. Not all of us are in the positition of being able to purchase a house without the help of a bank entity, hence if the rates are lower, undoubtedly that fact will help us in taking the step.