Grupo Vapf

One of the many financial products available is the swap interest rate

During the past years there have been many new mortgage products and not always the clients and the banking institutions totally understand the benefits and losses of these new products, for this reason a judge has just stopped, for the first time in Spain, the execution of a SWAP.

For those that are not up to date with all these terms, SWAP is a financial exchange of interest rates, a complex financial product thought for companies and self-employed people, to seal an agreement between the parties, where the loans will be referenced to a fixed rate for a prescribed period, regardless of external changes.

This product was not thought at the beginning for home mortgages, but with the Euribor rises from 2006 to 2008, it began to be traded by financial institutions, selling it as an insurance to protect them from future Euribor rises. The names vary depending on the entities, swap is also called  IRS (Interest Rate Swap), “clip”, “Bonus Clip”, secure repayments, financial exchange, contract coverage on mortgage, etc. ..

This document does not appear on the deeds or in the mortgage contract itself, and the great harm to the owner is when the Euribor drops considerably, as occurred in 2009 and early 2010, and cannot benefit from the drop on their monthly repayments.