The new law will improve conditions for the consumer
The draft Law on Real Estate Credit Contracts was published on November 17th . This law focuses on mortgage loans, adapting the legislation to the latest EU Directive and introducing a series of modifications that, for the most part, benefit the consumer.
What are the objectives that this standard states?
1. Transpose the Community Directive
2. To provide greater clarity to contracts
3. To protect the consumer and benefit them by reducing certain fees
4. Facilitate the transformation of mortgages to safer modalities
Who does it affect?
The directive applies the changes to consumers, but Spanish regulations intend to extend them to the self-employed as well.
Which mortgages will benefit?
Basically, mortgage loans formalized after the law comes into force will be affected, although certain measures aimed at transforming mortgages into safer modalities or in relation to their early termination will also affect pre-existing ones.
Main modifications
- Reduction of fees for early cancellation
- Variable-rate loans: the contract may stipulate a maximum fee of 0.25% of the capital repaid early during the first five years, or 0.5% during the first three years only. After that, no fee may be charged for this purpose.
- For fixed-rate loans, the maximum percentages established by the Bill will be 4% of the advance amount if it is taken out within the first ten years and 3% if it is taken out later. Currently, there is no legal limit on fixed-rate loans.
- Mortgage novation to more secure options: the new law incentivizes converting variable-rate mortgages to fixed-rate mortgages, as well as those denominated in foreign currencies to euros. In the first case, it limits the fees and associated costs of this process.
- Tied sales are prohibited; these are sales that make the granting of a mortgage conditional on the purchase of certain products (e.g., home insurance). However, this does not prevent the bank from making different offers, improving the loan terms, depending on the products purchased.
- Elimination of incentives for bank sales representatives for acquiring mortgages.
- Mandatory prior advice and verification by the notary. During the seven days prior to signing the contract, the mortgagor must be informed free of charge by the notary of its content and the existence of potentially abusive or opaque clauses.
- In addition, the notary will have a blacklist of clauses that, upon detecting them, he can request the bank to remove.
- Limitation of default interest: it may be, at most, 9%.
- Standard contract: the parties may agree to adopt a standard model that will be created ex process and in which simplicity and transparency will prevail.
- Early repayment: For foreclosure proceedings to begin on a mortgage loan, there must have been nine missed monthly payments or missed monthly payments representing more than 2% of the loan principal during the first half of the loan term. In the second half, the missed payments must reach twelve or represent 4%.
Access a comparison of the conditions proposed by the bill with respect to the current situation
We understand that this regulation largely stems from the need to reduce conflict in mortgage practice, which in recent years has led to a flood of legal proceedings and significant public discontent. Its effectiveness remains to be seen, given the creativity financial institutions demonstrate in regulating their products, but it is a step in the right direction.
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A graduate in Law and with a Master's degree in Tax and Financial Management from the University of Barcelona, he also holds a Postgraduate Diploma in New Technologies Law from ESADE. He specializes in tax and corporate law.
Before joining Àmbit Assessor as manager in 1999, he worked as head of the Tax and Accounting department at the Busquets Terradellas law firm.
For years, he combined his work with teaching, serving as a professor of Public Finance and Tax Law at the Open University of Catalonia.
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