IRPH Mortgages: Supreme Court Ruling & Case-by-Case Analysis

Mortgages with IRPF: the Supreme Court says ‘no’ to an automatic nullity

Perhaps the main conclusion of the two rulings that the Supreme Court has just issued (you can read them here and here) is that the simple use of the IRPH as a reference index in a mortgage loan is not a reason in itself for its nullity. Or put another way, using this benchmark is not illegal. That is why we must take into account the circumstances in which the mortgage was signed, as well as its content, to decide whether its marketing and writing pass the relevant legality filters.

The Chamber assures that “there is no univocal solution regarding the abusiveness of the variable interest clause referenced to the IRPH, since it will depend on the individualized examination in each case, in accordance with the evidence carried out.”

What the Supreme Court does do in these rulings is “establish some parameters of abuse of the clause in accordance with the rulings of the CJEU, to later verify whether or not the clause passes the abuse control in accordance with these criteria.”

The parameters that allow you to declare an IRPH clause in your mortgage abusive

The Supreme Court tries to shed light on this controversial issue and therefore designs a specific list of parameters that systematically allow us to differentiate those cases in which there is abuse from those in which there is not. This unification of criteria is especially useful for both consumers and lawyers, since it allows them to easily defend the possible nullity of this type of clause and, at the same time, sue with a certain level of certainty about what the judicial solution will be.

Furthermore, the fact that the parameters of the trial of abuse of the variable interest clause referenced to the IRPH are clear reinforces the consumer’s position and allows him to claim through extrajudicial means with greater chances of success.

Below we summarize what are these parameters so that you can identify them in your specific case. Some are quite technical in nature: if you have questions, contact us and we will guide you.

1. The assessment of abuse must be done at the time of contracting the loan. To determine the abusive nature of a clause, all the circumstances occurring at that time must be taken into account.
2. The eventual existence of an imbalance to the detriment of the consumer depends essentially, not from the reference index itself, but from the interest rate that effectively results from this clause. “Not only the values ​​of the reference index must be taken into consideration, but also the differential contractually applied to that index, in order to compare the resulting effective interest rate with the usual market interest rates,” says the Supreme Court.
3. The abusive nature of a contractual clause must be appreciated with reference to all other clauses of the contract. It may be relevant to examine the nature of any commissions stipulated in other clauses of the contract at issue in the main dispute, in order to verify whether there is a risk of double pay of certain lender benefits.
4. The fact that the clause makes use of a benchmark established from APRs applicable to the contracts taken into consideration to calculate the successive values ​​of this index, and that this APR includes elements derived from clauses whose abusive nature is subsequently declared, does not imply that the clause adapting the interest rate of the contract in question should be considered abusive.
5. You should compare the effective rate of ordinary interest resulting from the application of the clause that establishes the IRPH as a reference index and the effective rate of said interest resulting from the calculation methods generally applied, and, among others, with the interest rates applied in the market on the date on which the loan contract in question was concluded to a loan of an amount and duration equivalent to those of said contract.
6. Other aspects of the method of calculating the contractual interest rate or the benchmark may be relevantif they can create an imbalance to the detriment of the consumer, for which it will be necessary to consider the circumstances of each case.

On the other hand, to carry out the comparison of the effective rate of ordinary interest resulting with that calculation method and the effective rate of that interest resulting from the calculation methods generally applied in the market on the date on which the loan contract in question was concluded, to a loan of an amount and duration equivalent to those of said contract, the following must be taken into account:

1. Los Benchmark indices applicable to mortgage loans are supervised by the Bank of Spain and published monthly in the Official State Gazette, so it is public information and accessible to anyone. In addition, they are published in groups, so it is possible to compare them with each other.
2. A must be made uniform comparisonthat is, the interest rates resulting from adding the differential to the reference index in question must be compared.
3. This comparison cannot be limited to comparing the IRPH applicable at the time of signing the loan, with the Euribor applicable at that time. Although until November 2008, the value of the IRPH and the Euribor had been quite similar (less than one point difference), the differentials applied were different and conditioned the final result, that is, the applicable interest rate. These differentials were lower in loans referenced to the IRPH than in those referenced to Euribor. Therefore, it is not correct to make a comparison between the rate resulting from applying the agreed differential to the IRPH index, and the rate resulting from adding that same differential to the Euribor. And in any case, this comparison between IRPH and Euribor must be done with extreme caution, because there is a lack of data to know what the differential would have been applied to the loan if it had been referenced to the Euribor.
4. Yes, it may be relevant for this comparison, the fixed interest agreed by the parties, if applicable, for a first period. However, given the configuration of the IRPH index, the comparison must be made with the APR of the contract, which includes the effect of commissions and expenses.
5. The Bank of Spain publishes the Table of the official reference rates of the mortgage marketreferring to each annuity, which allows knowing the various types in the twelve months of the year. One of the headings in this table is the ‘Average rate of mortgage loans’ for ‘Credit institutions in the euro zone’. The data corresponds to the resolutions of the Bank of Spain by which certain official reference interest rates of the mortgage market are published. However, the data in this section only appears as of October 2012, so it does not provide information on the average rate of mortgage loans for previous months, since this data was not included by the Bank of Spain in its resolutions.
6. The Bank of Spain also publishes on its website, in the ‘Interest rate statistics’ section, a graph called ‘Synthetic interest rates for new operations of credit institutions and financial credit establishments’‘Households and non-financial corporations’, which allows, by clicking on the ‘Loans and credits (APR)’ curve (indicated in blue), to know the monthly synthetic rate of these loans and credits since January 2003. These data broken down between households and financial companies, respectively, appear as of 2021. There is no significant difference between these average rates in the graph corresponding to households and non-financial corporations, with those that appear specifically for households, by which the Supreme Court considers that the graph of the synthetic average rates is adequate to make the comparison.
7. It may also be relevant to compare the resulting effective interest rate with the usual market interest rates, the information provided by the National Institute of Statistics (INE), which publishes, as ‘Press Releases’, the ‘Mortgage Statistics’ corresponding to a certain period (annual or monthly), in the section ‘Mortgage interest rate’. The annual information includes the average interest rate and term of mortgage loans in all credit institutions, during a given year, as well as for mortgage loans from savings banks and banks. It also includes a graph that contains the same information (average interest and term by entities), corresponding to that year, in addition to for banks and savings banks, for credit cooperatives and rural banks, financial credit establishments, and other entities. The INE also publishes the information corresponding to a specific month.
8. The comparison of the effective interest rate resulting from applying to the IRPH the agreed differential with the usual market interest rates “cannot be limited to a mere numerical comparison”. The fact that the comparison shows that the interest on the loan by reference to the IRPH is higher than the average mortgage rate in that year or that month does not mean per se that the clause is abusive. To appreciate abusiveness, without incurring price control, the disproportion must be very evident. On the one hand, because the differential applied in one case or another along with the index, to each specific operation, would be determined by the risk assessment and other characteristics of the operation (solvency of the debtor, quality of the concurrent guarantees – guarantors -, term and amount of the loan, the connection of the client with the entity, the direct debit of the payroll, other receipts, the contracting of other products or services, etc.). And on the other hand, There needs to be a significant imbalance between the rights and obligations of the parties, to the detriment of the consumer.

Other elements that you should take into account

Finally, the following criteria are also important in order to assess possible abusiveness in your mortgage in terms of transparency control:

• First of all, we will check the compliance with the legal regime of the loan and, specifically, the application of the Order of May 5, 1994 on transparency of the financial conditions of mortgage loans and of Circular 5/1994, of July 22, to credit institutions, on the modification of Circular 8/1990, on transparency of operations and protection of clients, as well as Order EHA/2899/2011, on transparency and protection of the client of banking services and the Circular 5/2012, of June 27, of the Bank of Spain, to credit institutions and payment service providers, on transparency of banking services and responsibility in the granting of loans. In the case of loans that, due to their date or amount, were outside the scope of application of the Order of May 5, 1994 (those prior to December 9, 2007, in which the capital lent exceeded 25 million pesetas (150,253.03 euros), exclusively the general regulations on general conditions of contracting and consumption will be checked.
• Only in loans subject to the 1994 Order will it be necessary to verify the circumstances relating to the delivery of the prospectus provided for in its Annex I-3 and the negative differential mentioned in Circular 5/1994.
• As a general rule, Access to knowledge of the composition, peculiarities, values ​​and evolution of the official rate will be guaranteed through the publication in the BOE of Circulars 5/1994 and 5/2012 and the successive values ​​of the IRPH indices (later transferred to the electronic headquarters of the Bank of Spain), which will allow us to understand that this element of transparency control has been overcome, as summarized by the Legal News website.
• Directive 93/13 does not require that information on the past evolution and the latest value of the index necessarily have to be provided by the lending entity.not even in loans subject to the 1994 Order. The necessary information may come from elements not provided directly by said entity, provided that these elements are publicly available and can be accessed, where appropriate, through certain indications given in this regard by that professional, for which it will be enough for the information provided to include a mention of Circular 5/1994. For these purposes, the mere mention of Circular 8/1990 will not be sufficient.
• If, in the loans subject to the 1994 Order, the lending entity has failed to comply with the duty to deliver the brochure mentioned in Annex I, section 3, it will be necessary to take into account whether the specific procedure proves that This omission could be compensated for by information provided by other means.including indications on the source and publication of relevant index data.
• The CJEU deals with the relevance of taking into consideration, in the information required by an average consumer, the so-called ‘negative differential’ which is mentioned in the preamble of Circular 5/1994 as instrumental information that allows the adequate understanding of the concept of APR in such context and the difference between the types of structurally functioning as an APR – the IRPH – and the rest. The omission of a specific reference to this ‘negative differential’ will be irrelevant if the information included a reference to Circular 5/1994. and, if there was a first time period at a fixed rate, the APR applicable to that first period was indicated, or any other reference to the APR concept was mentioned. For these purposes, the mere mention of Circular 8/1990 will not be sufficient.
• The use of the IRPH in itself does not reduce the consumer’s ability to compare a loan proposal that uses this reference index with other proposals. that use other official indices that do not structurally consist of an APR.