All You Need To Know About Claiming Refunds On Your IRPH Clause In Spanish Mortgages
As our clients and readers of our blog will know, at Costa Luz Lawyers we are experts in reclaiming for our clients’ unfair payments made by banks, particularly when it comes to mortgages.
We have been closely following the recommendations and rulings coming out of the European Court of Justice (ECJ) regarding IRPH clauses in Spanish mortgages.
Should the ECJ judges rule in favour of clients on these clauses, then Spanish banks will be liable for millions of euros in refunds. If you have a mortgage with a Spanish bank, you could be entitled to up to €20,000.
Below we look at the background to IRPH clauses in Spanish mortgages. More importantly, we explain how you can pay less for your mortgage now and potentially claim thousands of euros back in the near future.
In early March 2020, the ECJ ruled that the final decision regarding these clauses must be decided case by case by the Spanish courts, allowing individuals to claim refunds from their bank on the grounds of lack of transparency and information.
If you have a mortgage with a Spanish bank, you could be entitled to up to €20,000.
In this article, we look at the background to IRPH clauses in Spanish mortgages. More importantly, we explain how you can pay less for your mortgage now and potentially claim thousands of euros back.
Need advice now about your Spanish mortgage? Read on or get in touch now.
What Is The IRPH?
IRPH stands for Indice de referencia de préstamos hipotecarios in Spanish (reference index for mortgage loans). Banks introduced it widely in 2008 as a substitute for the Euribor, the usual variable mortgage interest rate index, which at the time was at record highs.
It is calculated that around 1.3 million mortgages in Spain use the IRPH as their mortgage interest rate.
The IRPH is only applied to mortgages with variable interest rates.
Why The IRPH Unfair To Consumers?
The IRPH was marketed by banks as a less volatile index than the Euribor and as a cheaper one. The theory was that this index would not go up as much as the Euribor. However, since 2008, interest rates have crashed worldwide and the Euribor has actually been in negative territory since February 2016.
The IRPH, on the other hand, has been very slow to go down and is now considerably more expensive than the Euribor. Estimates calculate that the IRPH rate is between 1.5 and 3% higher than the Euribor. Homeowners with an IRPH-linked mortgage have therefore been paying a far higher rate than those with a loan indexed by the Euribor.
The IRPH has been widely criticised as being favourable to banks rather than the consumer. Consumer watchdogs also claim that it was imposed on clients without their knowledge or acceptance.
What’s the latest legal status of the IRPH?
The European Commission has already positioned itself clearly in favour of the customer rather than the bank in IRPH. Since then, the ball has been firmly in the legal court.
After months of debate, in early March 2020, the ECJ ruled that the decision on whether IRPH mortgage clauses are abusive lies solely with Spanish courts with the onus on judges to look at each case individually. This opens the gate to claims by tens of thousands of homeowners on Spanish banks for refunds on the excess amount they have paid because of much higher IRPH interest rates.
It is now up to the individual to claim a refund from their bank and if this does not happen, initiate legal proceedings. The judge will then look at the case and decide whether the clause meets EU transparency standards and whether the customer had enough information to make a considered decision. In particular, judge will question if the clause “allows the average customer, informed and reasonably mindful and perceptive, to understand what they are signing”.
If the answer is yes, then the customer will be liable for costs. If, on the other hand, the answer is no, the customer will be entitled to a refund from their bank. At Costaluz Lawyers, we firmly believe that this latter scenario will be the most common. In our experience, the majority of IRPH clauses in mortgages do not meet the required standards of transparency in the EU and are therefore abusive. We believe this opens up the possibility for claims for refunds.
If you have a mortgage with an IRPH clause, contact us now for a free evaluation of your case.
How do I know if I have an IRPH clause in my Spanish mortgage?
You can easily find out if you’re paying a much higher rate of interest on your Spanish mortgage. Go to your mortgage deeds and look for IRPH as the ‘tipo de interés’, usually in the third clause.
Or look for IRPH in your receipts for mortgage payments.
Discovered that you are paying the IRPH rate and as a result, may entitled to a refund on excess interest? Get in touch now.
What should I do if I have an IRPH clause in my mortgage?
No one likes paying more money than they need to. The latest rulings by the ECJ make this an excellent time to take a good look at your current conditions of your mortgage and improve them.
This may involve negotiation for better terms with your initial lender or even changing to a bank prepared to offer you more favorable conditions and above all, more transparency so that you know exactly what you’re getting and paying for.
Does anything I do now affect claims I might want to make in the future?
No, absolutely not. Any claims you make on the IRPH clause on your mortgage in the future will not be affected by changes or improvements you make now to your loan.
What can I do now?
As a Spanish mortgage holder with an IRPH clause, your absolute priority is to stop paying excess interest as soon as possible.
Once you have achieved this, your next step is to find out if you’re entitled to a refund from the bank you originally took out a loan on. Find out more about this below.
How can I pay less interest on my IRPH mortage?
As we’ve already mentioned, the IRPH clauses in Spanish mortgages mean higher interest rates and by extension, more expensive payments. There are three ways you can reduce these:
1. Negotiate a deal with your original bank to modify the initial mortgage deeds.
Your mortgage contract can be updated to reflect the Euribor interest rate rather than the original IRPH rate. This could save you up to €1,200 a year on mortgage repayments. Your bank may refuse to do this. If they do accept, be aware that they will probably ask for something in return such as increasing the linkage or differential. Expect to pay associated costs 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 a different interest rate (fixed or Euribor).
Once you have an offer from a different bank, your current lender has 15 days to match or improve on the new offer. By law, you must accept this counter-offer. Associated costs for this are approximately 0.5% of the outstanding capital (0.25% if the contract is more than five years old) plus notary, registry and mortgage manager fees.
3. Sign new mortgage deeds with a fixed or Euribor-referenced interest rate to cancel your current mortgage loan.
Of the three options, this is the most expensive because you also have to pay the costs of cancelling the original mortgage.
Note that under the ECJ ruling, IRPH clauses in Spanish mortgages may be declared abusive by a Spanish judge. In this case, you have the right to demand that your bank refunds you the extra charges incurred in all three of the above scenarios.
Note too that in any negotiations with your bank, you should make sure any new mortgage agreement you sign does not include another agreement relating to the IRPH index.
Get in touch for free advice on negotiating better mortgage terms with your bank.
How do I get a refund on excess interest charged through an IRPH clause?
If your mortgage loan includes the IRPH clause and a Spanish court deems it to be abusive, you will be entitled to a refund. In most cases, this averages at around €20,000, an amount well worth claiming.
At Costa Luz Lawyers, we are experts in claiming refunds for our clients from banks who have applied abusive clauses in mortgage contracts. We were pioneers in bringing the first case against Spanish banks and since 200? have helped dozens of clients get refunds and better mortgage terms with their banks.
If you would like us to look into getting a refund for excess interest charged on the IRPH clause in your mortgage, get in touch now.