Spanish Bank margins
Spanish Banks in effort to maintain profitable margins have increasingly become insistent that borrowers and those making a mortgage application contract with the lender a number of compulsory products.
Life cover linked to a loan in Spain
The product most resented by applicants is life cover as many already have enough cover from other providers or via work and the new cover is not necessary.
Often the cost of life cover can turn what is a competitive interest rate into a very costly loan particularly where the borrower is older and or the loan size is large.
To prevent applicants cancelling life cover at a later date most Banks now write into the mortgage deed a rate increase if this happens or take all the life cover premiums upfront by adding it to the mortgage amount granted. This means the borrower is not only paying for life cover they may not require but will be paying interest on it too.
Danger for the Banks
Despite losing a number of recent court cases surrounding unfair practices the Spanish Banks are ignoring this ticking time bomb which may affect profitability in later years if the Courts decide they could not insist the product was taken and are required to compensate borrowers.
Read the full article:- Is life cover the next Spanish Banks ticking time bomb
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