Intrepid foreign correspondent "M" writes:
I was talking to a French colleague who works in Madrid and bought an apartment in Madrid recently - he is moderately financially astute, but was given a loan by Bankinter in Yen rather than Euros, as a Euro interest rate of around 4.5% was considered too expensive. The currency risk is unhedged, and it bought back memories of the swiss franc loans in Australia in the 1980's.Loans in yen. That's a good one. You get a 1% or 2% interest rate. Never mind that the Economist just named the yen the single most undervalued major currency in its annual Big Mac Index ($)... 37% undervalued vs. the Euro. Imagine seeing your mortgage balance and payments rise 37% as exchange rates revert to norms.
I've heard 3rd hand that another Spanish bank (BBVA) are offering a 50 year mortgage, but I know that 40 year terms are now common for first home buyers entering a market that is so over-inflated, it makes Sydney at it's December 2003 peak look tame.
As for 50-year loans, they are really a sign of desperation. For the extra 20 years of indebtedness, you really save very little on each monthly payment. A colleague asked me yesterday about 40-year loans. I showed him that in return for increasing his number of payments by 33%, he'd save less than 10% on each payment (from $4800 to $4400 per month for an $800,000 loan, which will buy you an average, not-so-nice house in the Bay Area. Figure in another $1000 per month in property taxes, then maintenance and utilities, and you're easily talking $6000 or $7000 per month for an average house!).