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The mortgages to come.
"Only for 80% of the valuation price and, for better conditions, signing up for other banking products That is the picture of most mortgages. What’s new? ""No floor"" and low-cost have become sales arguments."
"In 2009, many mortgaged individuals were unpleasantly surprised to find that, when interest rates were at their lowest, their monthly payments on their variable-interest mortgages failed to go down at the same pace. The reason behind this is that some mortgage agreements include a ""floor clause"", on the basis of which the applicable interest rate has a floor limit which, in most cases, is between 2 and 3%, but it can be as high as 4.5%.
The stir generated around this issue was quite considerable and some entities went as far as to modify the clause and lower the floor limit through private agreements with some of the clients who complained or threatened to take their mortgages elsewhere.
Financial entities have known how to take advantage of the situation and are sometimes using it as a sales argument for their mortgages. An example of this was the January launch of the mortgage, Hipoteca Rompesuelos, from la Caixa. The product is not for everyone, as it is designed for the purpose of capturing mortgages signed prior to 2006 with other entities – which is the reason why it did not get into our 'Top'–, but reflects a likely tendency for 2010 as a result of its ""no floor"" argument.
Less financing
Another characteristic found when preparing the Top 10 is the 80% of the valuation price limit on the maximum amount of the mortgage. Of the more than 200 products currently available on the market, less than 30 finance up to 100% of the property. Most, as in the case of low cost mortgages, are aimed at young people below 35 years of age. We have included one –la Hipoteca Netbolia, from Sa Nostra– in our 'Top 10' because it distances itself from the others in this respect.
Incidentally, no low costmortgages –more marketing than anything else– have been included because they are essentially mortgage loans for young people, under the condition that they sign up for a large basket of the financial entity’s products. We did include one young person’s mortgage, from Caja Duero, only because it offers the highest number of repayment years on the market.
The condition of having to accept all kinds of products is a prevailing trend. Although there are wide differences. The mortgage that heads our 'Top', Banco Popular-e, offers a differential of 0.40%, whilst others that we found offer a differential of 1.40%, as well as having to sign up for up to 7 additional products. Therefore, before signing any mortgage agreement, a word of advice: compare and bear all the conditions in mind; it could mean a saving of dozens of millions of Euros at the end of the repayment period."
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Published in Finances and Services by Antonio Alonso / Miguel Ángel García Vega on 08/03/2010
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