Between 2006 and 2007 in particular, the Mortgage Loan Reference Index (Índice de Referencia de Préstamos Hipotecarios, or IRPH) was the second most widely used mortgage reference index in Spain. The latest IRPH figure, for January 2019, stood at 2.022%, compared with the 12-month EURIBOR rate of -0.116% recorded over the same period.
Although this index is no longer offered for new mortgages, it remains legally valid. However, given its relatively high level and the complaints that have been raised, we recommend that anyone with a mortgage linked to the IRPH seek professional advice.
In 2017, the Spanish Supreme Court ruled that linking a mortgage to the IRPH did not, in itself, constitute an unfair practice. This ruling did not convince all judges, leading to inconsistencies in the case law to be followed.
In view of these differing judicial opinions and pressure from consumer associations, the matter has been referred to the Court of Justice of the European Union (CJEU), which is due to deliver its conclusions on 24 June.
The European court will have to clarify whether the IRPH can be declared null and void or unlawful, whether it must be subject to the same transparency requirements as other banking products and, if it rules against the banks, whether its decision will have retroactive effect — that is, whether amounts improperly charged since the beginning of the mortgage must be refunded. The latter issue runs counter to the submissions made by the lawyer representing Spain, who asked the European court not to apply retroactive effect if the index were declared null and void, on the grounds that this could have serious consequences for the financial sector.
If the European courts declare the index null and void, the cost to Spain’s banking sector could range from €7 billion to €44 billion, according to a report by Goldman Sachs, one of the world’s largest investment banking groups.
Amid this uncertainty, some courts across Spain have suspended proceedings concerning the IRPH pending the decision from Luxembourg.
However, certain courts specialising in unfair terms, such as the court in Arrecife (Lanzarote, Canary Islands), have ruled for a second time that the IRPH was null and void without waiting for the European decision. They considered that borrowers had not been given transparent, accurate and prior information before signing their mortgage agreements, and ordered the lender to repay the amounts overcharged, together with statutory interest and legal costs.