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BANKING

Banking giant Barclays to close all accounts of Brits living in Spain

UK nationals living in Spain have begun to receive letters from their bank telling them that their accounts will be closed, in an apparent post-Brexit change. Have you been affected?

barclays closes accounts spain customers
Since Brexit, the UK banking sector no longer has access to the ‘passporting’ system which allows banks to operate in multiple EU countries without having to apply for a separate banking licence for each country. Photo by Tolga Akmen / AFP

Customers of Barclays Bank who are living in Spain and other EU countries have been receiving letters telling them that their UK accounts will be closed by the end of the year. 

A number of readers of The Local’s network of news websites have contacted us to report receiving either letters or messages in their online banking telling them that their accounts would be closed because of their residency in Spain or in other countries in the EU.

A Barclays spokesperson told The Local: “As a ring fenced bank, our Barclays UK products are designed for customers within the UK.

“We will no longer be offering services to personal current account or savings customers (excluding ISAs) within the European Economic Area. We are contacting impacted customers to give them advance notice of this decision and outline the next steps they need to take.”  

Customers are being given six months to make alternative arrangements. The changes affect all personal current accounts or savings accounts, but do not affect ISAs, loans or mortgages.

During the Brexit transition period Barclays closed Barclaycard accounts of customers in Spain, but did not indicate any changes to standard bank accounts.

READ MORE: 

Around the same time several other British high street banks began closing accounts of British customers who live in the EU, although with the exception of Barclaycard customers in Spain who were largely spared.

Many UK nationals who live in Spain maintain at least one UK bank account – in addition to a Spanish account – sometimes just for savings but others use their accounts regularly to receive income such as pensions or income from rental property or – for remote workers – to receive income for work done in the UK.

Not having a UK bank account can make financial transactions in the UK more complicated or incur extra banking fees.

READ MORE: What are the best UK banks for Brits in Spain?

Since Brexit, the UK banking sector no longer has access to the ‘passporting’ system which allows banks to operate in multiple EU countries without having to apply for a separate banking licence for each country.

And it seems that many UK high street banks are deciding that the extra paperwork is not worth the hassle and are withdrawing completely from certain EU markets. 

When British banks began withdrawing services from customers in the EU back in 2020, a UK government spokesman told British newspaper The Times that “the provision of banking services is a commercial decision for firms based on a number of factors” so Brits in Spain probably shouldn’t hold their breath for any help from that direction.

READ ALSO: Premium Bond holders in Spain may have to cash in if no UK bank account

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MONEY

How will rising interest rates affect my life in Spain?

The ECB's decision to raise interest rates in a bid to soften the blow of inflation will have negative consequences for some and a positive effect for others. Here's how it will affect those with loans, mortgages and savings in Spain.

How will rising interest rates affect my life in Spain?

The European Central Bank’s (ECB) Governing Council raised interest rates on Thursday for the first time in 11 years, with further increases likely in the coming months.

The ECB has raised its interest rates by half a percentage point, to 0.50 percent, to try and slow inflation in the broader Euro area, which in June jumped to 8.6 percent.

The increase represents the biggest increase in 22 years.

In Spain, inflationary pressures are being felt even more severely, reaching record levels.

READ ALSO: Rate of inflation in Spain reaches highest level in 37 years

Why have interest rates been raised?

When prices are increasing too quickly – in other words, when inflation is too high – putting up interest rates is one way to try and slow it down and get the rate back down to the ECB’s 2 percent target rate. 

The theory – and hope for consumers – is that this reduces the prices of products and services in the short term, although Christine Lagarde, President of the ECB, said this week that war in Ukraine likely means that inflation “will remain at an undesirably high level for some time,” and warned that “the economic horizon is darkening” across the Eurozone. 

“Food and energy will continue to be higher than expected,” the president added.

How does it affect life in Spain?

For those of you living in Spain, the main effect of increasing interest rates is on loans, mortgages, and savings, something many foreigners living in Spain rely on.

The impact can be positive or negative, depending on your financial situation.

If you have substantial savings, you could make more money on that lump sum as your savings will become more profitable, particularly if interests rise again.

On the other hand, if you are looking for a loan or credit, or repaying debts or mortgages, doing so could become much more expensive. 

READ ALSO: The products that are more expensive than ever in Spain

Simply put, an increase in interest rates makes loans more expensive – not only at the consumer level but for national governments and banks, too – and it also directly affects mortgage applications and those applying for credit, as well as people who pay a variable rate mortgage based on the Euribor.

Fixed rate mortgages, experts say, are more insulated to interest rate rises.

For many years in Spain, the vast majority of new mortgages signed (as much as 95 percent of them) were variable rate and thus vulnerable to changes in interest rate payments

But that trend has reversed in recent years, with around 80 percent of Spanish mortgages now being fixed rate agreements better protected against increased interest rate repayments.

The Euribor is a measure of the average rate of interest rates that banks lend to one another across the Eurozone and used, in effect, as a reference for mortgages. 

This measure has also jumped up in recent months and is now close to 1 percent, and experts forecast that it will see out 2022 at around 1.5 percent this year and that it could surpass 2 percent in 2023. 

These increases in the Euribor rate can have a big impact on consumers and families. For example, the repayments on a standard variable interest rate mortgage loan (a €150,000 loan to be repaid over 15 years, for example) could shoot up by more than €150 per month.

Impact on living costs in Spain

The ECB’s interest rate rises come at a time when Spanish consumers are facing dire economic circumstances, crippled by skyrocketing inflation, utilities bills and increasings goods prices.

According to a survey published by Banco de España this week, the percentage of Spanish families that are forced to use more than 40 percent of their gross income to make debt repayments could rise to about 15 percent as a result of the interest rate rises.

According to the report, the proportion of households with this level of financial vulnerability was just 11 percent in 2020 and 10 percent in 2017.

The increase in debt-strapped consumers was concentrated in the lowest-income households, which jumped from 9.5 percent to 15.1 percent, and those where the main breadwinner in the household was under 35 years of age, which went from 4.4 percent to 6.8 percent, and among the unemployed, which almost doubled and went from 4.9 percent to 8.7 percent. 

The increasing costs of loans and mortgage payments comes at a time the Spanish economy is facing a perfect storm of financial pressures. 

The economic shutdown during the Covid-19 pandemic, which included heavy job losses, combined with rising utilities bills, food prices and rampant inflation – partly caused by war in Ukraine – means that at the very time when many Spaniards might consider taking out a loan to help them survive these pressures, doing so has become more expensive.

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