Spanish lenders pull the plug on fixed interest rate mortgage loans

Raymundo Larraín Nesbitt, October, 14. 2022

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By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
14th of October 2022

The writing was on the wall.

We had been advising clients since inflation started to rear its ugly head in 2021 (well before Ukraine’s unlawful invasion), to hire mortgage loans referred to a fixed interest. It was clear that in a context of rising interests that - if we are to go by historic precedents could last a whole decade - this was the smartest move in the market.

Despite the irresponsible rose-tinged outlook on inflation of silver-tongued central bankers who carefully crafted speeches on how inflation was only 'temporary' and would soon subside once the global supply chain was restored, we strongly advised all clients this would not be the case and inflation was here to stay - for many, many years. This historically had always been the case.

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Following the relentless onslaught of a soaring inflation that shows no signs of abating, the US Fed boldly hiked interest rates again and again, which led Spanish lenders over the last months to apply 50% increases on their offers, restrict them, and now altogether remove them from the market as they hurt lender's balance sheets over the long run (albeit greatly benefit borrowers and consumers).

Any borrower who followed our advice, will now reap the rewards over the next years, paying significantly less money on servicing their mortgage instalments. Kudos to you.

For those who chose to ignore it, and hired instead variable interest mortgage loans, they are going to feel excruciating pain.

For those who missed out on the opportunity, it is now too late to hire a fixed interest mortgage loan, that is at a reasonable price.

Simply put, banks are no longer interested in peddling them - for now. Fellas, time to grab your umbrellas!

“A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain.” – Mark Twain.

American writer, humourist, entrepreneur, publisher, and lecturer. Among his novels are The Adventures of Tom Sawyer (1876) and its sequel, the Adventures of Huckleberry Finn (1885).

At Larrain Nesbitt Abogados we have over 19 years’ experience buying, selling, and renting properties. We are also specialized in taxation, immigration & residency visas. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88, or by completing our contact form to book an appointment.

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