Today comes is into force, 3 months after it was approved by Congress, the new law of real estate credit, a mortgage law reform that includes 8 main changes, that makes a strong stand for information and protection for people asking for a loan.
“The spirit of the new regulations is directed towards protecting consumers and users” explains Lluís Català, partner and director of the Real Estate Management department and expert in Real Estate Law. “In fact, approving this law means adapting to existing European regulations. Brussels have been constantly calling for the Spanish Government to update it.”
From the point of view of real estate, Marta Vilana, director of the Residential Department highlights that “uncertainty is not good for the sector since it postpones decisions, therefore the approval and immediate enforcement of this law after a long period of time will contribute to a certain stability.” However, the developers and constructors’ association are seriously concerned about certain initial imbalances or delays that are anticipated in the procedures. Consumers, notaries and banking entities have been preparing for the implementation of the mortgage law reform for months, a process that has led to some quarrels between sectors: some managing agencies have accused the new regulations of promoting a monopoly of notaries, and banks and notaries have had disagreements when deciding certain technical aspects.
Decrease in litigations
As of today, the client requesting a loan will have the right and the obligation to be advised free of charge by a notary, who must explain in detail the most important points of a bank mortgage. According to Català, "in this way, we gain in transparency and the large volume of litigation involving Spanish mortgages will be significantly reduced. In fact, this is a useful tool to stop, too, a large number of possible evictions”
More expensive mortgages?
"Although this is not the objective of the law, the fact that financial institutions bear the weight of all expenses except for valuation could imply an increase in the price of mortgages in the possible spreads or in the fixed rates offered by entities.” explains Toni López, and and director of the Corporate Real Estate department of Forcadell. "However, despite this initial forecast that points to the increase in mortgage loans, the truth is that some banks have begun to set their positions in the opposite direction."
Marta Vilana comments on some of these positions: "We have begun to see offers of mortgage loans at a more competitive fixed rate and without cost repercussions. In my opinion, banks have studied the new rules of the game and, knowing that they cannot have linked products and that transparency is mandatory, they will use price as the main weapon of competitiveness”
Trusting the market
The new mortgage law requires the bank to evaluate in depth the financial solvency and to request the credit rating at the Bank of Spain of the future mortgaged client. This way, you ensure the solvency of the transaction, notably reduce the risk of credit default and you contribute, finally, to the confidence in the different actors that will be part of a real estate transaction, which translates into greater confidence in the market ", concludes Toni López.
Previous