The default interest rates for mortgages cannot be higher than 12%.

The Government is trying to diminish the social pressure against evictions (after the suicides which have taken place in the last few months) with new changes in the regulation of foreclosures. The vice president Soraya Saenz de Santamaría announced two modifications yesterday, after the Cabinet´s meeting. On one hand, foreclosures will only take place when the mortgage holder has failed to pay three times and not only one, as it was established until now. On the other hand, the default interest rates will never be higher than 12%.

This is the chosen percentage as that interest rate can never be higher than the legal interest on money (currently 4%) multiplied by three. One of the greatest complaints of those affected by evictions was that the default interest rates applied by banks were, in their opinion, too high (they can sometimes reach 20%) placing the consumer in a very vulnerable position.

The announcement made by the Government has taken place one day after the Court of Justice of the EU delivered a sentence stating that the Spanish regulations on evictions was against the European norms as the consumers were unprotected against abusive clauses. Those affected could only appeal after they had been expelled from their homes. (…)

In reference to the Government´s decision to limit the evictions to three non payments, the Spanish Mortgage Association (SMA) explained yesterday that even though the law establishes that the bank should start proceedings once one non payment has occurred, this requirement is not always effective, as the institutions get in touch with the client with the intention of knowing his circumstances and reaching an agreement. “The foreclosure is a process which does not benefit any party. The client loses its home and the procedure is extremely costly for the institution. This is why they usually wait longer before starting the foreclosure”, they detailed.

Although these changes will be done through an amendment in Congress, the Government does not dismiss the possibility of approving these measures with a decree law, as they would like to end this process as quickly as possible. “We will analyze the duration of the processing in Parliament. We do not dismiss anything, it needs to be solved as soon as possible”, Saenz de Santamaria pointed out.

On the subject of these clauses having a retrospectively effect, the vice president declared that “if they are abusive, they are void, and this nullity means they cannot be part of an agreement. (…)”.

A working group has been created made of members of the main Ministries with competence in this matter – Economy and Justice, for example – to deal with the reforms needed to adapt the Spanish regulations to the sentence of the European court.

Source: Expansión