February 16, 2010 at 8:56 pm #55431
This month I was expecting an annual review of my mortgage with banco popular and looked forward to a reduction due to the drop in interest rates.
Imagine my horror when €1000+ was taken directly from my account for “settlement” for the previous 12 months. The shortfall from my 12 monthly payments set in Feb 09 was explained that it seemed to be that if rates drop I owe them money ? and if they rise they owe me money !!
I have done some research and it seems that some banks have been selling a “FREE” insurance against interest changes that is a GAMBLE, called a SWAP clause / insurance, I have read of one man who has been told that if rates remain as low as they are he will owe €25,000 in 12 months time due to this clause. But it will cost €10,000+ to cancel the “Free” insurance
Has anyone any more info or experience of a similar situation ? Have I been “conned” by the Spanish Mortgage “Jargon” “Notary” “Bank” or all 3
I am planning a further visit to see the Bank manager with an interpreter armed with as much info as possible about abusive clauses etc any help will be appreciated……Thanks
February 19, 2010 at 7:23 pm #97098
Further to my original post, I have had it confirmed that I do have a swap policy in force it was “Given Free” to me when mortgage was taken out in 2007, without any explanation, no money was taken last year as rates were stable for 12 months so i did not know this was in force, this year rates drop and i am fined €1000 because i accepted insurance and “Gambled” on interest rates !! I am “Waiting” to see how i will be affected in next 12 months if rates remain at historical lows or “how much” to cancel a policy that was “Free” !…….confused, I am………..and angry…….. there are several forums discussing the “Tragedy” of swaps which includes many “Spanish” customers” Who were told “you cannot lose” ……. WRONG ! Customer loses banks win.
This may rate alongside “Loan Insurance” and “Endowment” Scandals in the UK of recent years, did not expect to enter a high street bank and find myself in a “Casino”…………Check With Your Bank ! Colin. 😥
February 25, 2010 at 7:03 pm #97243
February 27, 2010 at 10:55 am #97275
I have never heard of this scheme and it seems from what you say they have just lumped this scam on you.
However, just reading between the lines, from your post, is this not some sort of mechanism whereby your mortgage cost is effectively fixed.
Your forthcoming mortgage payments are going to be reduced as the interest has fallen, however, you are being charged upfront 1000 euros because of this scam. So will you in effect for the forthcoming year be the same off as if interest rates had not fallen??
Conversley when rates rise you are going to be paying more, but the bank will offset this by paying you no??
I guess the devil is in the detail, in terms of your reduced payments verus charge, or extra payments verus refund from bank and when these payments are made.
Is that roughly correct. So if for example the interest rate moves 1% down, then the next year 1% up and this repeats for the duration of the loan, are you going to be in loss, or simply even.
February 28, 2010 at 11:08 am #97289
Thanks for your interest, although you may not have heard of this scheme you will see from my last paragraph that this is MUCH LARGER than even i thought when i started my research.
The point you make about coming out even could and should work if the banks had been even remotely fair on the gamble, i am not an expert but a retired banker friend of mine has looked into this for me and has pointed out that although “swaps” are common in large financial institutions dealing globally with billions, they have few limits and along with the possibility of large losses the reward of large wins make the risk worthwile to some traders, just like betting on a horse ! but in a betting shop the bookmaker pays out if you win.
BUT the clauses and limits on fluctuations in these “swaps” given away FREE by the banks ! favour the bank only, the customer cannot win ! He feels swaps should NEVER be considered for the retail market as they are so complex
It would take to long to go into the devil in the detail but the biggest clause is if you ask to cancel a product that was given for free the cancellation fee “kicks in” average accross spain is €15,000 to cancel, one customer with a bank has actually been told that his loss next year if rates remain at hstorical lows will be €24,000. Another separate case of a small businees was quoted €78,000 to cancel !!!
My bank will not even mention what my losses will be in 12 months, i think they are too embarrased, i am in negotiations to cancel and will post the outcome. On friday in El Economista (Spains FT) a front page headline and two page spread inside tells the story of this recent tradegy for over 300,000 customers countrywide who have it seems been duped into this scheme, conflicting court rulings have confused matters, but it seems that “class action” style lawsuits being prepared will hopefully rule in favour of the customer and end this “SCAM” by high street banks.
March 2, 2010 at 8:51 pm #97335
There is some coverage in The FT’s Alphavill blog
April 6, 2010 at 10:56 am #97828
I am afraid you need a specialist’s legal advice. Some Banks and Savings Banks have offered their customers those SWAPS ( or “clips”). There have been some succesful Court Cases till now (and it is expected to be many more in the future). Regards.
Barrister and Solicitor
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