How Avant's owner, Bankinter, sets mortgage rates in Spain

[Brendan Burgess]

I wanted to compare Avant's new rates with the rates its owner charges in Spain.

Their model is very interesting.

Fixed Interest Rate Mortgage | Bankinter

Bankinter

www.bankinter.com

Fixed-rate 10-year mortgage: Below is an example of the APR calculated for a mortgage offered by Bankinter, S.A. based on the following characteristics:

Mortgage amount: 150.000€. Term of loan: 10 years (120 monthly repayments). APR: 3.54%. Monthly instalments for 10 years: €1,434.60, and a final instalment of €1,435.18. Arrangement fee: €500.00. Total interest: €22,152.58. Interest rate: 2.80%. (120 months). Monthly repayments. Total repayment amount €177,609.44. Total cost: €27,609.44.

This APR has been calculated on the following basis:

- Arrangement of life insurance for an amount of 150.000,00 Euros for 10 years for a 30-year-old person. Annual premium of €164.29. Renewal annual insurance.

- Arrangement of home insurance for €100,000 for the structure and €30,000.00 for the content, with an estimated annual premium of €306.44. Renewal annual insurance.

-Appraisal costs: €249.56.

The interest rate is subject to the condition that the following products be arranged with Bankinter:

- Salary Account, Business Account or Non-Salary Account (discount of 0.40 percentage points).

- Life insurance covering the full mortgage amount, taken out with Bankinter Seguros de Vida S.A. de Seguros y Reaseguros (discount of 0.60 percentage points).

- Comprehensive Home Insurance with minimum home content coverage of €30,000.00 and structure coverage equivalent to the appraisal value of the property for insurance purposes, to be arranged with Liberty Seguros and brokered by Bankinter, S.A., Operador de Banca-Seguro (discount of 0.20 percentage points).

- A pension plan/EPSV Have a pension plan/EPSV in place with Bankinter Seguros de Vida, belonging to Bankinter, S.A. Group, for the entire mortgage term and make a minimum annual contribution to it of €600.00 (discount of 0.10 percentage points).

Compliance with discounts will be reviewed annually.

These products are optional for the customer, but if they are not arranged the above rate (2.80%) will be increased by 1.30% corresponding to the sum of each of the products not arranged. Accordingly, if none of the conditions are met the fixed rate will be 4.10% (APR 4.55%). Monthly instalments for 10 years: €1,525.82 and a final instalment of €1,525.32. Total interest: €33,097.90. Total amount repayable: €185,977.06. Total cost: €35,977.06. This APR has been calculated on the basis of arranging with Bankinter, or a different provider, the legally required home insurance policy for €100,000.00, with an estimated annual premium of €172.46, in addition to an annual maintenance fee of €45.00 for the current account required for payment of the instalments, an arrangement fee of €500.00 and appraisal costs of €249.56.

 

[Brendan Burgess]

Standard rate: 3.65%
Less discount
For bank account: .4%
For life insurance: .6%
For home insurance: .2%
For pension plan: .1%

= Discounted rate: 2.35%

Arrangement fee: €500
Appraisal cost (valuation?) : €250

Doesn't quite reconcile with this:

I am surprised that the discount for life insurance is so big 0.6%. But maybe mortgage protection is not compulsory in Spain, so someone taking it out is giving the lender a lot of comfort.

.6% of €150k is a saving of €900 in the first year which is 6 times the cost?

- Arrangement of life insurance for an amount of 150.000,00 Euros for 10 years for a 30-year-old person. Annual premium of €164.29. Renewal annual insurance.


Very odd.

 

[Brendan Burgess]

The only similar discounts in the Irish market were from KBC - 0.2% for opening a current account - and Ulster Bank - various discounts for different types of current accounts.

But they are all gone now.

Brendan

 

[unknowninsider]

A similar mortgage pricing process occurs in France and other European countries. IMO, the data often quoted in Irish papers on interest rates is not a true reflection of all the idiosyncratic quirks of regional mortgage markets. Further, the ECB data they reference is also smoothed out so it doesn't reflect month on month changes. Just changes in pricing trends.

 

[LDFerguson]

I am surprised that the discount for life insurance is so big 0.6%. But maybe mortgage protection is not compulsory in Spain, so someone taking it out is giving the lender a lot of comfort.

.6% of €150k is a saving of €900 in the first year which is 6 times the cost?

- Arrangement of life insurance for an amount of 150.000,00 Euros for 10 years for a 30-year-old person. Annual premium of €164.29. Renewal annual insurance.


Very odd.

The saving based on 0.6% will drop each year as you repay capital.

Example they give is based on a 30 year old borrowing €150,000 over 10 years. Cost of life insurance would be far greater if it's a couple in their 40s borrowing over a longer term.

I'm guessing that they've taken an average of all their potential customers. They'll lose on the young single ones like their example but gain on the older couples. And perhaps if their marketing is good, they'll cross-sell other life insurance products in due course.