Finally!!! This is our conclusion to the novelty introduced by the Mortgage Law that will enter into force in June 2019.
Finally, the Spanish legislator has decided to put an end to something hailed as a banking “malpractice”. We will no longer have to yield to the obligation imposed by the bank in order to “benefit” from taking out its insurance policies.
Let us detail what the regulation says and what its consequences are.
Mortgage insurance: advantages and disadvantages
Until now, when we took out a mortgage, the bank offered us an interest rate from which a series of bonuses could be deducted.
These discounts required a series of products to be contracted with them:
- Pension plan
- Mortgage life insurance
- Home insurance
- Other policies
And, also usually, having a credit card, a series of direct debits of bills per month, etc. Thanks to all this, for example, we could go from Euribor + 1.3% to Euribor + 0.8%.
Our complaint has always been that this practice does not benefit free competition, and what it provokes is that people pay much more for these insurances.
There are consulting firms that analyzed this year after year, confirming that the insurances are more expensive with the bank, costing more than double.
New mortgage law and its consequences
As we say, this ends as of now. In June 2019, the new regulation comes into force, which introduces several changes, not only related to insurance.
The main improvements are:
- Mortgagors” are no longer charged Stamp Tax (Impuesto de Actos Jurídicos Documentados).
- Notary, registry and agency fees are paid by the bank.
- The mortgage may not be associated with other products sold by the bank, although they may require it to be contracted.
What this last point means is that they may require home insurance, which will be very common, but they cannot impose the provider.
The banks could no longer raise the interest rate of the mortgage because the client chooses another insurance that seems better.
It is important to be clear that all this is applicable to new mortgages signed after the entry into force of the Law, not to previous ones.
Our opinion as an Insurance Brokerage Firm
What we have felt so far is helplessness for this situation. It is terrible to have to budget for home or life insurance, in which you see improvements from 20% to even half the cost, in addition to improving coverage, and not being able to change the insurance.
Why? Because by affecting the differential, sometimes the loan installment went up so much that it was not compensated, at least in terms of pure cost; in terms of coverage it is a different matter.
With this change, the consumer is much more protected and can really ask for several prices. Thus, he will be free to choose the supplier that really protects him and gives him added value.
From PIB Group Iberia we are glad to have raised awareness of this problem, as well as encouraged mortgaged customers to compare. We hope from now on to be able to help many more and that you can ask us for a quote when contracting your mortgage.
