We recently wrote about the European Commission’s decision on the IRPH clause in mortgages

The IRPH (Index of Reference of Mortgage Loans) is an indicator used by various financial institutions to update the variable interest rate on mortgages. It has been widely criticized as being influenced by banks to suit them; being imposed on mortgage clients without their knowledge or acceptance.

The European Commission’s decision to null the character of the index makes this is an excellent time to study your existing conditions and improve your mortgage contract or, indeed, change your bank to an institution that offers better and more transparent conditions.

Any posterior claims you have made on IRPH related overdue mortgage payments will not be affected by you improving or changing the conditions of your mortgage.

IRPH: What solutions do I have prior to the IRPH decision by the CJEU?

The conclusions of Maciej Szpunar, General Counsel of the Court of Justice of the European Union, on the abusive application of the IRPH clause, will not be announced until the 10th September 2019.

Once the wording of the Judgment is known, the appropriate judicial actions may be initiated. In the meantime, those clients who have IRPH linked mortgages can replace them with the Euribor and enjoy lower monthly payments, without the need of filing a lawsuit.

There are three options: 

1. Negotiate an agreement with the original bank modifying the initial mortgage deed:

Your mortgage contract agreement can be updated to reflect a Euribor interest rate instead of the original IRPH rate. This could provide savings of up to 1,200 Euros per year on mortgage repayments.  

  • The bank can and may refuse, but if it accepts, expect that they will ask for something in return: to increase the linkage or differential …
  • These types of operations usually have an associated commission of between 0.1% and 1% of the outstanding capital, plus notary, registry and mortgage manager fees.

2. Transfer the mortgage to another bank that agrees to apply another type of interest (fixed or referenced to Euribor).

Your original bank has 15 days to match or exceed the new offer and we are required to accept the counter offer.

  • The associated commission is approximately 0.5% of the outstanding capital (or 0.25% if the contract is more than five years old), plus Notary, Registry and Mortgage management agency fees.

3. The signing of a new mortgage, fixed or referenced to the Euribor to cancel the current mortgage loan.

  • This is the more expensive option as the cancellation of the original mortgage loan has its own costs.
  • In any of the three above cases: if the CJEU ends up considering the application of this index abusive, you will maintain the right to demand that the bank refund us the extra charge.

In the case of reaching an agreement with your own bank, you need to be mindful of not signing another agreement relating to the IRPH index.

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