18/11/2014 – El Mundo
In their run to win more borrowers and clients, banks turn the screw on differentials even more. One of them, Kutxabank, has slashed its IRD from 4% in mid-2013 to a staggering 1%. Such a low interest rate has not been seen in years and it is even smaller than the super-low CajaSur’s 1.25% offered since the end of 2013.
According to the Basque entity, the alluring differential (applied after the first year of loan) has no fixed requirements and is highly personalized. Although access to the Euribor + 1% rate can be reached through many combinations, it involves purchase of quite a few loyalty products.
Precisely, the lowest differential on the market is available as soon as the following fulfilled: all borrowers’ salaries deposited, shopping done with use of debit or credit card for at least 4.800 euros annually, home and life policies (minimum 150.000 euros) taken out, and the Voluntary Social Welfare Entity (EPSV) contribution or a pension scheme of 2.000 euros per year paid.
Founder of financial product price comparison website HelpMyCash.com Olivia Feldman considers the importance of the differential at the moment of chosing a mortgage. ‘The difference between an Euribor +1.5% and an Euribor +2% could be translated into 50-euro savings monthly and into more than 10.000-euro during the loan’s lifetime’, she said while analyzing a case of a 150.000 euro loan for 25 years and discounting the Euribor will stay at 0.36%.
‘However’, remarks Feldman, ‘the customer shall not stop at the IRD but look beyond it, at the compensation. It is normal that banks choses the salary deposit and two insurances but if they also demand, for example, an unemployment insurance or a pension scheme, the deal may turn out expensive’.
Olivia Feldman also puts emphasis on the number of mortgage-comparison searches on her website which increased as a result of the mortgage war among Spanish banks. She does not rule out further cuts in IRD in 2015.
Another expert, Gonzalo Bernardos, head of the University of Barcelona’s Real Estate department hopes the Euribor+1% won’t provoke further cuts in IRD. ‘This level is still acceptable but going below it would be a real blunder’, he comments on the matter. In his opinion, these mortgages do not bring profits to banks but they do provide them with greater market shares and an extreme loyalty on the part of customers.
Bernardos calculates that a bank must pay around 0.3% for management of a mortgage or, in the best case, 0.1%-0.2% over the amount borrowed. Therefore, he believes this kind of loans will be granted to medium- and high-class customers to avoid insolvency issues.
Original article: El Mundo (by Jorge Salido Cobo)
Translation: AURA REE
Source: AURA Real Estate Experts