Cab­i­net gives green light for new mort­gage law bill

The Ley de Crédito In­mo­bil­iario, which now goes to Congress to be de­bated, is ex­pected to be ap­proved next spring

Costa Blanca News (South Edition) - - Spanish News -

By Suzan Daven­port MAR­I­ANO Ra­joy’s cab­i­net on Fri­day ap­proved a bill that aims to re­duce costs gen­er­ated by changes clients make to mort­gages and cre­ate more trans­par­ent trans­ac­tions with Spain’s banks, af­ter the floor­clause fi­asco which saw thou­sands of clients un­know­ingly tied into above-mar­ket mort­gage rates.

The bill will lower early can­cel­la­tion fees for vari­able-rate mort­gages, elim­i­nat­ing them al­to­gether af­ter five years, said min­is­ter for the econ­omy Luis de Guin­dos on Fri­day, although this part of the pro­posal will only ap­ply to mort­gages taken out af­ter the bill be­comes law.

For clients who al­ready have mort­gages, con­vert­ing a vari­able-rate mort­gage to a fixe­drate mort­gage will be com­mis­sion free af­ter the first three years and there will also be a re­duc­tion in no­tary and land reg­istry costs.

In ad­di­tion, the new law will stop banks forc­ing clients to ac­cept prod­ucts linked to mort­gages, such as life in­sur­ance, and in­stead lenders will have to of­fer clients a choice, with or with­out as­so­ci­ated prod­ucts, and ex­plain clearly the dif­fer­ent costs.

The new law would also es­tab­lish that in the seven days prior to sign­ing a mort­gage the lender must sup­ply clients with de­tailed doc­u­ments on the loan they are to sign, which they can then take to the no­tary for free in­for­ma­tion about what they are sign­ing and of the ex­is­tence of any opaque clauses.

This process would then be writ­ten into the mort­gage deed.

Once the law is passed it will also in­crease the time limit be­fore a bank fore­closes on a de­faulted mort­gage from the cur­rent three months of missed pay­ments to nine months or the equiv­a­lent of two per cent of the bor­rowed cap­i­tal, dur­ing the first half of the loan’s life.

Dur­ing the sec­ond half of the mort­gage the per­cent­age would rise to 4% or to 12 months un­paid.

An­other of the points cov­ered in the bill is the pos­si­bil­ity of clients ap­ply­ing for, at any point dur­ing a loan, a change in the cur­rency in which a for­eign cur­rency mort­gage is re­paid, either to eu­ros or to the cur­rency the client earns.

De Guin­dos high­lighted that in Spain “more than 90% of mort­gages are cur­rently vari­able-rate” and that in­ter­est rates are “ex­traor­di­nar­ily low and won’t stay that way” over the next 20 to 25 years, the length of an av­er­age mort­gage.

Photo: EFE

Min­is­ter for econ­omy Luis de Guin­dos af­ter last Fri­day's cab­i­net meet­ing

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