EU Court rules Spain’s mortgage pricing could be abusive

The Court of Justice of the European Union (CJEU) has ruled that loan agreements tied to Spain’s mortgage price index (known as the IRPH) lacked transparency and possibly misled customers.

The decision paves the way for banks to pay out potentially millions of euros to hundreds of thousands of families across Spain. 

In the ruling, the Luxembourg-based court urges Spanish courts to "ensure the clear and understandable nature" of mortgage loan agreement clauses and to "replace" them in the event that they are considered abusive for the purpose of protecting customers. 

The CJEU thus contradicts the Spanish Supreme Court's ruling, which considered that mortgages referred to in the IRPH cannot be subject to judicial control because they do not imply any abuse by the banks.

Affecting up to 400,000 families in Spain, the IRPH is a reference index with a fixed interest rate, meaning these customers have not seen their monthly mortgage repayments fall with lower interest rates, unlike those linked to the Euribor European index.

The case ended up in the ECJ after a Barcelona court asked the EU judiciary to resolve the question of whether the European directive on abusive clauses in mortgage contracts applied in these cases.

In September, the advocate of the CJEU gave a non-binding ruling that said there may have been abuses in the way the banks administered the agreements, and this morning's decision from the court has confirmed that. 

In the same month, it was also ruled that evictions could only take place after 12 months of failing to fulfill the mortgage obligations.