Mortgage rates in Tenerife look set to drop following the recently announced ECB (European Central Bank) rate cuts on 4th December. The ECB cut the base rate from 3.25% to 2.5% as a measure to lower inflation across the 15 countries that use the interest rate. It is the largest rate cut since the inception of the ECB rate 10 years ago
Following the rate cut, the Euribor has gradually moved downwards and as of January 2nd 2009 the 3 month Euribor was at 2.86%. The Euribor is the benchmark used by most banks in Spain to determine their interest rate for borrowers. The common form of expressing the interest rate of a Spanish mortgage is “Euribor + 1%” for example. With Euribor+1% being the average non-resident Spanish mortgage rate available in Tenerife, borrowers can hope for a rate in the region of 3.86% for property purchases.
Those looking for a Spanish remortgage in Tenerife could hope for a new rate in the region of 3.8% to 4.3% depending upon their personal status. Property owners in Tenerife who are currently struggling to pay their mortgages may look at remortgaging as a way of alleviating pressure. First a foremost a switch to an interest only Spanish mortgage could now make a massive difference in terms of monthly mortgage payments.
For every 100,000€ borrowed, at an average rate of 6.25% on a 20 year term, the repayment is 731€ per month.
Switching to interest only means a borrower can immediately take advantage of the recent rate cuts rather than having to wait for their bank to update their mortgage interest rate (which could take as long as 12 months).
A new interest only mortgage at prevailing rates would reduce their monthly payments from 731€ to only 321€ per 100,000€ borrowed, more than halving their monthly commitments.
Given the economic crisis, this could mean the difference between keeping a hold of a property and handing back the keys for many owners.
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