The European Court of Justice ruling on IRPH Spanish mortgage loan clauses opens a new window of opportunity for borrowers to claim against their banks in Spain

The court handed down judgment on 3 March 2020, granting consumers affected by the index reference for mortgage loans (IRPH) a new chance to claim against Spanish banks.

An alternative to Euribor, the IRPH is a mortgage indicator for interest rates applied in Spain by the Spanish Central Bank. Generally, it is more expensive than Euribor, and banks sold these rates to consumers as a stable alternative to the fluctuating Euribor, which now has negative rates.

This judgment means that Spanish Judges are able to establish whether these types of mortgage clauses are abusive or not, in accordance with the following rules:

  1. If the parties in a mortgage loan contract did not agree on something different, Spanish law does not oblige banks to apply the IRPH in their mortgage loans imperatively. This type of interest should not be mandatory when applied to mortgage contract loans. If the parties have not agreed to this type of interest in their contract, the bank cannot impose it.
  2. The national courts of a Member State have to verify the transparency and the intelligible language of contractual terms related to the main object of a contract.
  3. A contractual clause setting a variable interest rate in a mortgage loan has to be formally and grammatically understood for an average consumer, who is well-informed and reasonably observant, to be in a position to understand the specific functioning of the method used for calculating the rate interest. This consumer has to assess, based on clear and comprehensive criteria, the potential meaning and the economic consequences of such a clause and its future financial obligations.
  4. In this case, regardless of the agreement between the consumer and the bank, if a mortgage loan cannot continue after the IRPH has been declared abusive, the Judge will be able to replace this IRPH with another type of interest to prevent the customer from being exposed to an unfavourable situation.

This Judgement has significant implications, as it opens a new window of opportunity to customers to recover the amounts unduly charged by banks on this type of mortgage loan.

If you have an IRPH in your mortgage loan contract, contact us at We will analyse your mortgage loan deed prior to any engagement.

Article by Julio Prieto
Del Canto Chambers

* This article has been written by a third party not owned or controlled by Spanish Property Insight (SPI).
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