Draft Real Estate Credit Act

Source: Spanish Government
Type of item: Analysis
Date: 3/11/2017
Upcoming commitment expected by: 3/11/2017

The government approved the Draft Real Estate Credit Act, which transposes the European Directive (Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property) and seeks to enhance the transparency of mortgage contracts. The text is just a proposal that now will be discussed in the parliament.

The aim of the new legislation is to reduce costs associated with modifications to mortgage contracts and to strengthen transparency.

- Facilitates the conversion of mortgages from variable rates to fixed rates, both for new mortgages and those already in force. The commissions for this conversion are eliminated as of the third year.

- Notary and registry costs are reduced

- Commissions for early repayment of loans at variable interest rates are made cheaper. Commissions are cancelled out entirely after the mortgage loan has been in force for more than five years

- A maximum commission is established for fixed-rate mortgages, compared with the current situation whereby two potential commissions are applied, one of which has no type of limit whatsoever.

- It establishes the right of the consumer to exchange a loan in a foreign currency to the national currency or indeed any other type of currency

- Related sales are banned - those which force the consumer to accept a series of financial products as a condition for obtaining a mortgage

- Legal regime for real estate credit intermediaries is regulated.

- The requirement is extended to begin to enforce a loan to nine unpaid monthly instalments or to an amount that exceeds 2% of the capital granted during the first half of the loan; during the second half, the percentage will be 4% or 12 unpaid monthly instalments.