Introduction
A recent court ruling in northern Spain has significant implications for thousands of mortgage holders with IRPH interest rates. This decision could mean substantial refunds for affected borrowers. The IRPH is a mortgage reference index, similar to Euribor, used to calculate interest rates.
The Facts
This case involved a standard home mortgage for an individual, with a loan of up to €150,000.
Imperative Rules That Were Broken
Before 2011, banks were legally required to follow these imperative rules when offering IRPH mortgages:
- Provide an information sheet showing how the IRPH interest rate had changed over the previous two years.
- Make a binding offer well before the mortgage was signed.
- Give a clear explanation of what the IRPH interest rate is, who calculates it, and where it’s published.
Clause Invalid Due to Broken Rules
The court found that the bank did not follow these imperative rules and declared the clause that used IRPH as the mortgage interest rate to be invalid.
What Happens When It’s Invalid?
The clause is completely invalid, as if it never existed.
The Mortgage Contract Can Still Continue:
The judge decided that the mortgage contract can continue without the interest rate clause. Only if the contract couldn’t continue without that clause would the judge ask the borrower (if they are a consumer) if they prefer to cancel the contract or replace the clause with another one. In this case, the judge decided that the contract can continue without the IRPH interest rate clause.
What This Means for Mortgage Holders
The mortgage contract continues, but:
The bank must return all interest that was paid.
The borrower only has to pay back the original loan amount, without any interest.
This is very good news for anyone in a similar situation.
Thank you
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Disclaimer
Please, note that this is general information. This is not specific legal advice. It is advisable to seek legal advice for any specific legal issue.