Tag: life assurance

Bankinter Revives Fixed Rate Mortgage War

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

Kutxabank Stirs Up The Mortgage War With A 2.5% Fixed Rate Product

12 March 2015 – Expansión

Kutxabank launches one of the best offers in the market / The Basque entity enters the battle started by Sabadell and CaixaBank and seeks to foster loyalty from its customers.

Kutxabank continues to embroil itself in the mortgage war that has been unleashed in the Spanish financial sector, which is showing the first signs of economic recovery. Two months after the launch of mortgages offering rates of Euribor + 1%, the bank comprising the former Basque savings banks BBK, Kutxa and Vital, has now launched one of the most attractive fixed rate offers in the market: a 30-year 2.50% fixed rate product.

According to the entity, its proposal is the “most attractive” in the market because, not only is it offering a reduced interest rate, also this rate will remain unchanged throughout the life of the loan. The nominal interest rate (‘tasa nominal’ or TIN) of 2.50% represents an annual percentage rate (APR, ‘tipo annual equivalente’ or TAE) of 3.28%, according to the new calculation rules, which include various expenses.

Currently, several institutions are embroiled in the fixed-rate mortgage war. Sabadell is offering a nominal fixed rate mortgage at 3.25% (4.18% APR) over thirty years and at 2.90% over twenty years, and CaixaBank has loans at nominal rates of between 2.50% and 3%, depending on the other products held by the customer, and with no set-up fees. Other banks, such as Bankinter, Bankia and BMN are also offering fixed rate mortgages with interest rates of between 3.4% and 4.6%.

Just like with its variable rate mortgages, Kutxabank is looking to foster loyalty from its customers and achieve maximum links (with them) through this aggressive offer . As such, the entity requires them to have their salaries, which must amount to at least €3,000/month, paid directly into their accounts; make payments with the bank’s cards amounting to more than €3,600/year; make contributions to pension plans or social welfare institutions of more than €2,000/year, and take out life assurance contracts with Kutxabank. The set-up fees for the mortgage will be 0.25%, with a minimum charge of €400.

According to the Basque entity, fixed rate mortgages “provide greater security and stability” for customers, as they allow them to know what their instalments will be, at all times, regardless of (variations in) interest rates (in the wider market).

Kutxabank has a 35% share of the mortgage market in the País Vasco and almost 70% of its total loan book is concentrated there, amounting to €31,000 million. The bank is working on the assumption that the mortgage market is in full recovery, after increasing its home loans by 24% in 2014.

Original story: Expansión (by M. Á. F.)

Translation: Carmel Drake