9 June 2016 – Expansión
A new battle has commenced in the war between the banks to grant fixed rate mortgages. One of the most active entities in the commercial supply of these products, Bankinter, is redoubling its efforts. Yesterday, the bank announced widespread cuts in interest rates on its 5-, 10-, 15- and 20-year mortgages. Bankinter, whose fixed rate mortgages were already amongst the most competitive in the market, has cut the interest rate on its ten-year home loans from 1.75% to 1.6%; on its fifteen-year home loans from 2% to 1.8%; and on its twenty-year home loans from 2.3% to 2.1%.
The zero interest rate environment in the Eurozone has led the banks to offer fixed rate mortgages, given that 12-month Euribor, which is the index to which most floating rate mortgages are linked, is trading at negative rates (-0.018%). In this context, it is more profitable for the banks to offer fixed rate mortgages, given the limited margin they are able obtain on their variable rate products.
The main advantage for customers is that they know the amount of interest they will have to pay on the day they take out the mortgage; that figure is fixed and will not vary for the duration of the mortgage term. In other words, clients are protected against possible interest rate rises, although they would not benefit from any further hypothetical decreases.
Bankinter’s fixed rate mortgage has an arrangement fee of 1%, with a minimum of €350. It also charges a penalty of 0.5% during the first five years of the life of the loan in the event of its total or partial repayment, and of 0.25% thereafter, as well as a commission of 0.75% to offset the interest rate risk, in the event that the early repayment generates a loss of capital for the entity.
If Bankinter’s fixed rate mortgages are taken out to purchase a primary residence, then the value of the loan may not exceed 80% of the purchase price or appraisal value (the lesser of the two amounts). If the product is requested for a secondary residence, then the limit is 60% of the lower of those two values.
In addition, in order to benefit from these interest rates, the bank requires its borrowers to receive their salary into their Bankinter account, as well as to take out life assurance and home insurance with the entity. The applicable interest rates are higher if these products are not contracted.
The reductions also apply to the fixed element of Bankinter’s 15- and 20-year mixed (fixed and floating) rate mortgages, which decrease to 2% and 2.3%, respectively.
Original story: Expansión (by A.R.)
Translation: Carmel Drake