Interest only has all but disappeared from the Spanish Market as Banks have bowed to pressure from the Bank of Spain to remove this type of lending.
One lender, Lloyds International ES, remains with a 5 year interest only term followed by up to 20 years repayment but how long they will be able to resist the pressure being applied remains to be seen. To help convince banks to remove the facility the Bank of Spain increases the level of capital that is required to be placed on the balance sheet for every mortgage with the facility. In an already unprofitable environment this is a huge disincentive for Banks and has forced them one by one to remove the option.
With Lloyds borrowers can expect to pay 0.50% more on the margin for interest only severely eroding the monthly payment benefit a client would receive.
Lloyds in many ways are using the same tactic as the Bank of Spain “we are not saying you can’t have it but expect to pay a price for doing so” Using cost to encourage non take up.
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