Spain’s mortgage payments are up €100 a month: how to claw some of it back

Homeowners with variable-rate mortgages in Spain are facing payments around €100 a month higher than a year ago, yet the consumer group OCU says a single call to the bank could win back thousands of euros. The trick is knowing what to ask for, and what to do if the answer is no.

Mortgage payments are about €100 a month higher

Anyone whose variable-rate mortgage is reviewed this month is likely to feel it. The 12-month Euribor averaged 3.24 per cent in October, up from 2.19 per cent a year earlier, according to Kelisto’s October figures. 

Kelisto estimates that adds roughly €100 a month, or €1,206 a year, to a typical variable mortgage reviewed annually in November. Those reviewed every six months are looking at about €48 more a month. The index has been climbing all year, having hit an 11-month high back in March.

Now OCU, the Spanish consumer watchdog, says many borrowers shouldn’t just put up with it. In a release published on Wednesday November 4, the group urges people to renegotiate, particularly if they signed when the spread was above 0.9 per cent.

A quarter of a point off the spread can be enough

The first move is asking your bank for better terms. OCU says knocking 0.25 percentage points off the spread is usually enough to make it worthwhile, and the case is stronger when you still owe a lot and have plenty of years left. Linked products such as life insurance can be haggled over too.

To show what’s at stake, OCU uses a €150,000 mortgage signed in September 2019 over 25 years as an example, at the Euribor plus 1 per cent. With €116,079 still owed and 18 years to go, the payment is about €752 a month.

A 0.25-point cut in the spread would save more than €2,700 over the remaining term, OCU calculates, even after deducting €512 in costs for moving to another bank. If your bank agrees, the change is made through a novation, an amendment to your existing mortgage contract.

If your bank says no, take the mortgage elsewhere

However, banks don’t always play ball. In that case OCU says you can use a subrogation, which means transferring the mortgage to another lender without cancelling it. The other route is cancelling the loan and signing a new one, which the group says isn’t much more expensive.

Some lenders are offering variable-rate mortgages with lower spreads and promotional starter rates. OCU says those can cut the monthly payment by more than €80 in the first years and save more than €9,000 over the life of the loan.

The main cost is usually the property valuation (tasación). The new lender pays the notary, land registry and administration fees, and for variable-rate mortgages signed from June 2019 onwards, OCU says there’s no early repayment fee for changing banks once the first five years have passed.

Before that point, the law lets banks charge up to 0.25 per cent of the amount repaid in the first three years, or 0.15 per cent in the first five, depending on what your contract says.

Fixing the rate would cut the example payment to about €692

OCU also thinks moving from a variable to a fixed rate is worthwhile at the moment, given the uncertainty over where rates go next. In its example, a fixed rate of about 2.9 per cent would bring the payment down from about €752 to about €692.

That’s roughly €60 a month, or €720 a year, and more than €12,000 over the remaining 18 years, after costs. However, those figures assume the Euribor stays where it is now, so the picture changes if rates move. OCU adds that the advantage of fixing would grow if the Euribor rose.

Watch out for charges you can claim back

OCU also warns about abusive mortgage charges, including formalisation fees, arrangement commissions and single-premium insurance. Borrowers are entitled to a refund of these, it says. 

So the first job is to dig out your mortgage contract and check the spread. Anything above 0.9 per cent over the Euribor is where it’s most worth asking for a better deal.