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Spain passes law to help clients claim back abusive mortgages from banks

The Spanish government approved a decree on Friday that gives banks three months to reach a settlement with clients who were sold mortgages with abusive interest rate floors.

Spain passes law to help clients claim back abusive mortgages from banks
Photo: Shaun Curry / Flickr

The goal is to prevent courts from being flooded with lawsuits after the European Court of Justice last month ruled lenders must reimburse mortgage customers with so-called “floor clauses”, Economy Minister Luis de Guindos told a news conference.

About 1.5 million people were sold those mortgages, which impose a limit on how far interest rates can fall in line with a benchmark rate, he added after a weekly cabinet meeting.

The Bank of Spain has estimated that the European court ruling could cost Spanish lenders over €4 billion ($4.2 billion).  

Under the measure approved Friday banks must contact customers to inform them that they are affected and offer them a settlement within three months of the decree coming into force.

If no agreement has been reached after three months, customers would then still be able to file a lawsuit to seek compensation.  

Banks will have to “create specific departments” to handle the reimbursement claims, De Guindos said.

The image of Spain's banking sector suffered a huge blow during the country's economic downturn due to several cases of poor management and corruption.  

Spanish banks lent heavily during a decade-long property boom which went bust in 2008, sparking a sharp economic downturn that caused the unemployment rate to soar to a record high of 27 percent in 2013.

Thousands of families who were not able to keep up with their mortgage payments were evicted from their homes and Spanish banks in 2012 received €41.4-billion in European Union bailout funds.

Most of Spain's home loans are pegged to the 12 month-euro interbank offered rate, or Euribor.

The benchmark has fallen, but clients with mortgage floors did not benefit.

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PROPERTY

How does Spain’s new website to find cheap homes up for auction work?

Spain’s Tax Agency has created a new web page where you can find great bargains on properties sold at auction. Here’s what you need to know.

How does Spain's new website to find cheap homes up for auction work?

If you’re looking for a property to buy in Spain, one option you may want to consider is buying a home at auction, where you will often pay below the market value.

In Spain, the Agencia Tributaria or Tax Agency owns many properties, most of which have been repossessed or seized due to outstanding debt.

Many of these properties are put up for auction, enabling you to get some great bargains. Up until now, it has been difficult to find out when these auctions are held and the details of the homes being sold, but recently the Agencia Tributaria launched a new web page providing all this information.

The page provides details on all the properties in all the different provinces across the country and is dedicated to the sale of homes, garages, plots of land and commercial spaces with prices from just €20,000. You can access the site here

When you get to the page, simply click on the province that you’re interested in and you’ll find a list of all the properties to be sold at auction there, including photos, information on the size and number of rooms, a description, and a guide price.

The site will also give you financial information such as the minimum bid amount, the auction value and an appraisal of the property.

When you find some properties that you’re interested in, you can go and log-in with your [email protected] PIN to save them to your favourites list and receive notifications to your phone about the date of the auction.

READ ALSO: How to save lots of time on official matters through Spain’s online [email protected] system

According to property giant Idealista in order to place a bid, you must pay 5 percent of the starting price and when the auction is over, if you are the highest bidder, you will have to pay the remaining amount within a particular time frame. You can pay this in cash or through a mortgage. 

Be aware that you may also have to pay several fees, as well as the price of the property such as the Patrimonial Transfer Tax and Tax on Documented Legal Acts. 

If you register on the Auction Portal with your digital certificate or a username and password, you will also be able to see the bids that have already been made on the home, as well as the cadastral reference. You may also be able to place provisional bids ahead of time.

For those who are unsure of how the auction process works in Spain or are nervous about going to their first auction, the Tax Agency website also details all the auction and bidding procedures. For any other information that you can’t find online, you can call 91 598 63 34.

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