Whoever has a mortgage has probably visited – physically or virtually – other banks to check if by changing entities they can get a lower interest rate than the one they currently pay. The process is common and has been practiced for years: the bank is interested in attracting a new client with a loan that will bind them for decades, and the borrower can save a good amount of money in interest.
Traditionally, this change is made through subrogation, a mechanism that allows a mortgage to be transferred from one bank to another. But in recent months financial institutions are limiting this route. The bank’s preferred strategy is for the client to cancel their current mortgage and sign a new one with the entity that offers better conditions. For the bank it means reducing costs; For the client, assume more expenses.
With subrogation, the receiving bank assumes most of the formalization costs. On the other hand, when opening a new mortgage, the client must face some additional expenses, such as the appraisal of the home or the registration cancellation of their old loan. In addition, the contract may include an early termination fee, although this is limited by law. The practical consequence is that many mortgage holders are being pushed to cancel their mortgage and apply for a new one to obtain a better interest rate.
“It is more expensive for the client to cancel and contract a new mortgage than to make a subrogation, since they have to assume more associated expenses and commissions (registration cancellation, notary, registration, management, appraisal). Although most banks have mortgage subrogation simulators in their digital channels, in practice, canceling and contracting a new loan could be the only possible option to achieve a real improvement in the interest rate and conditions,” explains Gabriel Rodríguez Lorenzo, co-founder of the financial comparator SinCommisiones.
Sources from four banks confirm that this is a widespread practice in the sector, driven both by cost savings and by the possibility of accelerating deadlines, since subrogation usually involves additional procedures that lengthen the process. The data supports this trend: according to the National Institute of Statistics (INE), in the first six months of 2025, some 4,700 surrogations were registered, practically half (-48%) of the more than 9,000 carried out in the same period of 2024.
“Subrogation limits the room for maneuver of the new entity, since it must assume an inherited contract with already agreed conditions. On the other hand, in a cancellation and contracting of a new mortgage, the new entity can apply its current policy and link the client with new products, which impacts the profitability and loyalty of the new client,” adds Rodríguez Lorenzo.
Margins to the limit
The market context plays an important role. Spanish banks currently offer the second cheapest mortgage prices in the euro zone, which leaves very tight margins and very strong competition in this business segment. According to the latest data from the European Central Bank (ECB), the average interest rate on mortgages granted in Spain in August was 2.68%, significantly lower than the 3.3% average in the eurozone. This means that it is cheaper for clients to borrow in Spain, but for banks the margins are narrowing. The CEO of Bankinter, Gloria Ortiz, assured this week that mortgage competition is becoming “a little irrational.”
Therefore, in order to offer competitive and profitable conditions, entities have found a way to slightly reduce the costs associated with subrogation, transferring part of them to the client if they choose to open a new mortgage. As explained by the same sources, it is a process in which both win: the bank saves costs, time and procedures in the administrative process and the client gets a lower price than what they are paying.
In fact, they point out that the banks’ preference for clients to cancel their mortgage and open a new one is also due to a way to speed up the process. Subrogation is slower and more cumbersome at an administrative level because the source and destination banks have to exchange documents. In many cases, it can take several months to complete, while opening a new mortgage allows the terms to be accelerated, something especially valuable in an environment where interest rates can vary rapidly in line with the Euribor.
They also point out that in a subrogation the bank of origin has the right to make a counteroffer. The procedure requires that a binding offer be sent, that the bank of origin study it and decide whether to match it or improve it. The legal period is 15 calendar days. The decision to stay or go to another entity corresponds to the client. But during that time, you continue paying your usual fee, and if the Euribor varies, the new bank’s initial offer could be out of date, forcing you to restart the process.
“The difference is that subrogation is usually cheaper in terms of expenses, but limited because you depend on the bank of origin. Canceling and opening a new mortgage has some extra cost such as cancellation of registration, but in exchange it gives you total freedom to choose the bank and conditions. In many cases, what you save in interest more than compensates for that initial expense,” explains Jorge González-Iglesias, CEO of the financial advice platform Gibobs.
The expert details that so that the client does not lose out with the change, before making a subrogation or canceling and opening a new mortgage, it is important to request a binding offer from the new bank and be clear about the medium and long-term savings accounts. “To really improve current conditions, in addition to getting a lower interest rate, it is also interesting to reduce the monthly payment, shorten the term or eliminate unnecessary commissions,” he adds.
Since 2019, surrogacy had become a fundamental mechanism. That year the new Mortgage Law came into force, which sought to increase competition between banks and make it easier for consumers to improve their conditions without assuming excessive costs. Inspired by the idea of mortgage portability, the rule intended to make it easier to change entities when another offered a more favorable interest rate. It also sought to establish a fairer distribution of mortgage expenses, reinforce transparency in contracting and protect the consumer against abusive clauses.
