If you have a mortgage in Spain linked to the IRPH index, a recent European Court of Justice (ECJ) ruling could open the door to significant savings.

This decision empowers borrowers to challenge their banks over unclear mortgage terms, potentially leading to the nullification of the IRPH index in many cases. But what exactly is the IRPH, and why does this ruling matter to you?

What is the IRPH index?

The IRPH (Índice de Referencia de Préstamos Hipotecarios) is a benchmark interest rate used by Spanish banks to calculate mortgage repayments. Unlike the more widely known EURIBOR, which tracks the average interest rates European banks charge each other, the IRPH is based on the average rates charged by Spanish banks for mortgages. Critics argue that the IRPH often results in higher payments for borrowers compared to the EURIBOR.

Many borrowers were unaware of how the IRPH worked or its potential economic impact when signing their mortgage agreements. Banks were required to provide transparent information about the index, but in many cases, this didn’t happen. This lack of transparency has been at the heart of numerous legal battles.

The European court’s new ruling

On 12 December 2024, the ECJ issued a landmark ruling in response to a question from a Spanish court (Court of First Instance No. 8 of San Sebastián). The ruling clarifies that:

1. Transparency is key: Judges must examine whether the IRPH clause in a mortgage agreement is clear and understandable for the consumer.
2. Bank’s responsibility: To meet transparency standards, banks must prove they provided sufficient information about how the IRPH is calculated, its historical trends, and its potential future impact on payments.
3. Consequences of non-compliance: If a bank cannot demonstrate that it fulfilled these obligations, the judge can declare the IRPH clause null. In such cases, the mortgage interest rate could be recalculated using the EURIBOR, which is generally more favourable for borrowers.

Why this matters to you

This ruling significantly shifts the burden of proof onto the banks, requiring them to demonstrate that they adequately informed borrowers. In most cases, this will be challenging, as banks historically provided little or no information about the IRPH. This aligns with similar rulings about “floor clauses,” where banks also failed to meet their transparency obligations.

For borrowers, this means:

• Potential refunds: If your mortgage was tied to the IRPH and the clause is declared null, you could be entitled to a recalculation of your payments and a refund of overpaid interest.
• Stronger legal position: The ECJ’s decision now binds Spanish courts, giving borrowers a powerful tool to challenge their mortgage agreements.

What should borrowers do now?

If your mortgage is linked to the IRPH, here are some steps to consider:

1. Review your mortgage agreement: Check if the IRPH is included and whether your bank provided clear information about it when you signed the contract.
2. Seek legal advice: Consult with a lawyer specialising in Spanish mortgage law to assess your case and guide you through the claims process.
3. Act promptly: Legal proceedings can take time, so it’s best to start as soon as possible.

A turning point for borrowers

This ruling is a game-changer for mortgage borrowers in Spain, offering a new avenue for challenging unfair terms and potentially saving thousands of euros. It also serves as a reminder of the importance of transparency in financial agreements. If you’ve been affected by the IRPH, now is the time to act and explore your options.

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