Interest only mortgages a ticking time bomb

10-year Interest only mortgages to come to an end this year for properties purchased in the peak in 2007 in Spain.

As we all know the property market ended its peak in 2007. From 1996 to 2007, Spain’s national average house price rose by a whopping 197{8ffce72bfd1f9b3f5d8b0ef2230e543e76a5ce407a245cd6391b5bca5679dfbb}. During this time thousands of foreign investors wanted a piece of the pie and were lured by interest-free mortgages and rental guarantees.

It seemed a no-brainer at the time as repayments were extremely low and affordable for a fixed 10-year time frame.  In the UK, Halifax were the main protagonists of these mortgages and a mixture of slack lending and possibly mis- selling encouraged large volumes of UK and Irish to buy abroad, some, taking equity out of their own home to purchase the dream home in Spain to retire In.

 

House Price changes in Spain over the years

Source:

http://www.globalpropertyguide.com/Europe/Spain/Price-History

10 years on….

Time has lapsed, loans have been sold on and the 10-year Interest-free periods are due to come to an end.  Recently we had an elderly couple seek advice from our team as, at a time when they should have been enjoying retirement, their Spanish property mortgage repayments went from a manageable €230 per month to in excess of €1200. In addition to this, the property was in severe Negative Equity.

This is an issue that we will see becoming more and more prevalent as the 10-year life span will be coming to an end for properties purchased in the peak of the market in 2007.

 

Lenders welcoming a proactive response.

In our experience, we can advise that Banks and lenders recognise that this is a ticking time bomb and so are welcoming a proactive response through recognised and reputable intermediaries.

In the aforementioned scenario, EU Property Solutions were able to liaise with the lender on behalf of the client and conclude matters in their entirety by disposing of the property and settling the mortgage shortfall for a minimal amount.

If you require any advice in respect of a problematic property in Spain or further afield, please contact the team today at EU Property Solutions who can provide options and assistance.

James Bell

Director

0330 124 1230

[email protected]

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