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The Challenges of Mortgage Regulation in Spain – How are HNW clients affected by lender’s restrictions on currencies?

The ‘Ley Hipotecaria’ continues to be a hot topic. It’s clear that banks are still struggling to implement terms that comply with the mortgage regulation despite it being on the verge of its 3 year anniversary. Having said that, we are advised that the Bank of Spain is now moving from the implementation phase to the regulatory phase, and as such, will be monitoring the activities of regulated entities such as ours, and will begin clamping down on intermediaries that continue to operate on an unregulated basis, of whom we are told there are many.

The mortgage law continues to have an impact on the range of products available for non-Euro earners seeking finance in Spain. You may already know that in order to protect consumers from exchange rate risk, banks must offer clients the option to convert their mortgage from Euros into the currency in which they earn should the exchange rate differ by more than 20%. This led to some banks withdrawing their products for non-Euro earners and others modifying their product range. Most banks have now made a decision about which currencies they are comfortable with. At the time of writing, both variable and fixed rate mortgages are still available to clients earning in the main currencies. Private lenders, many of which are located outside of Spain, may also provide a solution for HNW clients earning in currencies not accepted by many Spanish banks since they are not subject to the same regulation.

We look forward to updating you further on what is a constantly evolving situation, especially as travel continues to open up.