Finally! This is our conclusion to the novelty introduced by the Mortgage Law which will enter into force on June 2019.
Finally, the Spanish legislator has decided to put an end to something hailed as a “malpractice”.” banking. We will no longer have to give in to the obligation imposed by the bank. to “benefit” us by taking out their insurance.
Let's look at what the rule 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 number 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 monthly direct debits of bills, 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, The result was that much more was paid for these insurances.
There are consultancies that analysed this year after year, confirming that insurance is more expensive with the bank, The cost of the new products can be more than twice as high.
New mortgage law and its consequences
As we say, this stops now. In June 2019, the new regulation comes into force, which introduces several changes, not only related to insurance.
The major improvements are:
- Mortgagees“ are no longer charged Stamp Duty (Impuesto de Actos Jurídicos Documentados).
- Notary, registry and agency fees are borne 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 a home insurance policy, which will be very common, but cannot impose the supplier.
Banks could no longer raise mortgage rates because the client opts for another insurance that seems better.
It is important to be clear that all of this is applicable to new mortgages signed after the entry into force of the Act, not those signed before the entry into force of the Act.
Our opinion as Insurance Brokers
What we have felt so far is helplessness because of this situation. It is terrible to have to budget for home or life insurance, in which you see that you improve from 20% to even half the cost, as well as improving coverage, and not being able to change the insurance.
Why? Because by affecting the spread, the loan instalment sometimes rose so much that it was not compensated, This is at least in terms of pure cost; in terms of coverage it is another matter.
This change provides much better consumer protection, You can actually ask for various prices. Thus, decide freely on the supplier that really protects you and gives you added value.
From PIB Group Iberia We are glad to have raised awareness of this problem, as well as encouraged mortgage customers to compare. We hope that from now on we will be able to help many more and that you will be able to ask us for a quote when taking out your mortgage.
