The IRPH in mortgages has been a topic of discussion and uncertainty among millions of Spanish families. Unlike the popular Euribor, this index has been the cause of numerous legal disputes.
At Domoblock, we have decided to write this article to delve into the complexity of the IRPH. We will examine everything from how it works to its current legal status and the real impact it has on your mortgage.
The acronym IRPH in mortgages stands for: Mortgage Loan Reference Index. It is an official indicator that some banks use to reference variable-rate mortgages in Spain.
This benchmark is calculated based on the average interest rates on mortgages offered by the banks themselves. This particular feature has been the main source of criticism and controversy.
You may also be interested in: fixed, variable, or mixed mortgages.
In the past, the IRPH in mortgages was presented in several modalities. Over time, the regulation evolved and the number of active indices was reduced. We will break down the three types of IRPH for you; it should be noted that today only one of them remains active.
The IRPH for savings banks was a mortgage index calculated using the average interest rates on mortgages granted by savings banks. Published monthly by the Bank of Spain, it ceased to be used in 2013 as part of an evolution of the banking system.
It operated similarly to the previous one, but was based on the average interest rates on mortgages granted by banks. The Bank of Spain also published its value on a monthly basis.
Like the previous one, it ceased publication in 2013 as part of a reform of benchmark indices.
It is the only IRPH index that remains fully in force and continues to be officially published. It remains in force because the Bank of Spain considered it valid to replace the two previous indices in contracts that used them as a reference.
Order EHA/2899/2011 forced many entities to replace discontinued indices with the current one. However, in some cases, they were replaced by other indices unilaterally and without due transparency.
The IRPH mechanism in mortgages works like any other variable-rate mortgage: the payment is recalculated periodically by adding the value of the index and a spread.
Unlike the volatile Euribor mortgage rate, the IRPH is a more stable index but historically higher. This stability translates into higher payments for the consumer throughout the entire loan.
Although both are reference indices for variable-rate mortgages, their characteristics and behavior are very different. In the following comparison table, we summarize the differences.
Understanding the above differences is a starting point for understanding why the IRPH has been so controversial.
The first thing you should do is gather and organize your loan documentation. Then, to find out if your mortgage is linked to the IRPH, you can follow these recommendations.
Carefully review your mortgage deed. Look for the clause that refers to the variable interest rate. If you find any mention of IRPH, you will know that your mortgage is linked to this index.
If for any reason you do not have your mortgage documentation, contact your bank and request a detailed statement. It should include the index used to calculate your payments.
Consult a mortgage law professional. These specialists are familiar with legal jargon and banking documents. Therefore, they are the right people to analyze your mortgage deed and confirm whether your loan has IRPH or another index.
The IRPH value for mortgages is published monthly by the Bank of Spain in the Official State Gazette (BOE). To calculate your payment, you must add the IRPH value plus the spread agreed in your contract.
Then, you must apply that percentage to the outstanding principal of your mortgage. For example, if the IRPH is 1.986% and your spread is 0.25%, the applicable interest rate will be 2.236% (1.986% + 0.25%).
Yes, it is possible to claim that the IRPH is unfair in mortgages, even if your loan has already been paid off. The period for taking legal action does not begin when the mortgage is signed or paid, but when the consumer realizes that the clause is unfair.
The Spanish courts, following the guidelines of the Court of Justice of the European Union (CJEU), will analyze whether the bank complied with the “double transparency control.”
It is essential that the bank provide you with the information in a clear and precise manner. If this was not the case and you were not informed about the nature of the IRPH, the clause is likely to be considered unfair.
Like any benchmark index, the IRPH has two sides to it. Although it has a good reputation, it offers some features that could be considered an advantage, but these are overshadowed by the economic disadvantages it entails.
The main advantage of the IRPH, its stability, is outweighed by the disadvantage of its high cost. It is essential to understand both sides in order to comprehend how this index affects your finances.
The legal situation regarding IRPH remains complex. The Court of Justice of the European Union (CJEU) requires Spanish judges to analyze the transparency of the clause, but it has not declared it abusive by default. Therefore, each case must be evaluated individually.
Generally, lawyers work on a percentage of the amount recovered.
The IRPH value is updated monthly. Check the Official State Gazette (BOE) or authorized websites.
Contact a specialist to analyze your case and guide you through the negotiation process or legal proceedings.
The mortgage deed, receipts for payments made, and any other documentation related to the loan.
Current case law does not define a clear limitation period for unfair terms.
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The IRPH in mortgages marked a milestone in the Spanish mortgage market. Although it is hardly used anymore, thousands of families continue to be affected. If your mortgage includes this index, it is essential to seek legal advice to protect your finances. At Domoblock, we can help you— contact us!
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