You are in:

Share on Facebook: opens new windowShare on Twitter: opens new window

​Council of Ministers

Government approves Draft Real Estate Credit Act

Moncloa Palace, Madrid, Friday 3 November 2017
CouncilofMinisters
Pool Moncloa/J.M.Cuadrado

The aim of the new legislation is to reduce costs associated with modifications to mortgage contracts and to strengthen transparency. The Council of Ministers also agreed on the draft law of the new Basque Country Quota Act for the five-year period 2017-2021 and measures on the elections to the Regional Parliament of Catalonia to be held on 21 December.

The government approved the Draft Real Estate Credit Act, which transposes the European Directive and seeks to enhance the transparency of mortgage contracts, explained the Minister for Economic Affairs, Industry and Competition, Luis de Guindos.

As regards the transposition, Luis de Guindos stressed that the new legislation has consistently opted for those alternatives that are most favourable to the mortgage debtor. Accordingly, commissions for early repayment of loans at variable interest rates are made cheaper, and are even cancelled out entirely after the mortgage loan has been in force for more than five years; a maximum commission is established for fixed-rate mortgages, compared with the current situation whereby two potential commissions are applied, one of which has no type of limit whatsoever.

Furthermore, it establishes the right of the consumer to exchange a loan in a foreign currency to the national currency or indeed any other type of currency; related sales are banned - those which force the consumer to accept a series of financial products as a condition for obtaining a mortgage - and the legal regime for real estate credit intermediaries is regulated.

Pool Moncloa/J.M.CuadradoThe Minister for Economic Affairs pointed out that the text is not limited to transposing the EU Directive, but rather responds to recent judicial rulings that have clearly evidenced the need for greater transparency in mortgage legislation.

In this regard, the new legislation facilitates the conversion of mortgages from variable rates to fixed rates, both for new mortgages and those already in force. The commissions for this conversion are eliminated as of the third year, and notary and registry costs are reduced.

Greater transparency and information

Other new features oblige the lender to hand over detailed information on the mortgage to the client, including the most "sensitive" clauses and tables with the evolution of mortgage instalments, and the mortgagor will receive free advice from the notary public on the content of the contract for seven days prior to exchanging contracts.

The new legislation also regulates the early repayment of the loan, "such that any type of discretion when agreeing this clause is avoided", pointed out Luis de Guindos. The requirement is extended for financial institutions to begin to enforce a loan to nine unpaid monthly instalments or to an amount that exceeds 2% of the capital granted during the first half of the loan; during the second half, the percentage will be 4% or 12 unpaid monthly instalments.

Basque 'Quota'

The Council of Ministers agreed to send the draft law on the new Basque Country Quota for the five-year period 2017-2021 to Parliament, as well as to amend the Economic Agreement Act with the Basque Country.

The Minister for the Treasury and Public Function, Cristóbal Montoro, claimed that both draft laws contain the agreements on financing and self-governance on tax matters agreed between the Regional Government of the Basque Country, the provincial councils and the Government of Spain at the Joint Committee on the Economic Agreement held on 19 July.

Pool Moncloa/J.M.CuadradoThe main new feature establishes a basic quota for this year of 1.3 billion euros, given the reduced participation of the Basque Country in the State's active employment policies. It also adapts the economic agreement to certain legislative changes in State law and introduces improvements into tax management and coordination between the two tiers of government.

Cristóbal Montoro announced that the new Quota Act and the amendment to the economic agreement will come into force on 1 January next year. "This is the case because the political agreement is feasible between institutions that have different ways of perceiving many issues when there is a will, loyalty and mutual respect and when dialogue is held within the scope of our legal system, and specifically, under the Constitution", declared the Minister for the Treasury.

Tunnelling of AVE to Murcia and other agreements

The government approved a complementary tunnelling project for the AVE [high-speed rail travel] to Murcia, that increases the original budget by almost 17 million euros.

According to the Minister for Education, Culture and Sport, and Government Spokesperson, Íñigo Méndez de Vigo, an additional proposal has been authorised to extend the tunnelling and waterproofing works being implemented by ADIF Alta Velocidad from the level crossing in Santiago el Mayor until the level crossing in Los Garres, in the new railway access to Murcia.

The Council of Ministers also analysed a report on the amendment to the General Law on the Defence of Consumers and Users to transpose an EU Directive to increase the legal certainty of citizens when purchasing travel packages. Íñigo Méndez de Vigo pointed out that this new legal framework provides for online purchases.

At a business level, the government authorised three agreements to grant loans to SMEs and young entrepreneurs for a total sum of 98.4 million euros.

Elections to Regional Parliament of Catalonia

Pool Moncloa/J.M.CuadradoFollowing the ordinary meeting, the Council of Ministers adopted a series of measures related to the elections to the Regional Parliament of Catalonia on 21 December that the government called last Friday under the scope of Article 155 of the Spanish Constitution.

On another note, the Council of Ministers approved a Royal Decree to regulate subsidies and control the elections accounts in these regional elections and an Agreement that establishes the public service obligations provided by Correos [postal system] to guarantee the normal development of the elections.

It also approved an amendment to the Budget of the Regional Parliament of Catalonia for 2017 with the aim of covering the costs of the elections.

The Government Spokesperson remarked that these are technical measures and that the elections on 21 December will include an official census, a legally constituted electoral commission, transparency, equal conditions for all political parties, observers, security, a strict public counting of votes and an official announcement of results. "These elections must serve to offer the stability and certainty that Catalonia requires, particularly to avoid those economic consequences that we are seeing, which are so detrimental to this autonomous region", stated Íñigo Méndez de Vigo.

Integrating growth

Pool Moncloa/J.M.CuadradoIn his weekly assessment, the Government Spokesperson highlighted that the figures seen in recent days certify that the Spanish economy continues down the path of "integrating or inclusive growth, in other words, growth that includes social well-being with high quality public services".

Íñigo Méndez de Vigo pointed out that, according to the National Statistics Institute, the Gross Domestic Product grew by 0.8% in the last quarter, and hence accumulated growth in the first three quarters of the year amounts to 2.5%, which means it will be feasible to reach a figure of 3.1% for 2017 as a whole, which was the latest forecast the government sent to the European Union.

He added that, "we are also seeing growth while containing inflation, which is slowing down, and with a zero balance in the balance of payments, thus meeting the public deficit target".

The Minister for Education, Culture and Sport also reviewed the results of the Labour Force Survey for the third quarter of the year, which shows that unemployment has dropped by 182,600 people. Íñigo Méndez de Vigo underlined that unemployment has fallen by more than 10 points since it peaked and "we are moving at a good pace towards the figure of 20 million people in work - the target set by the government for this term of office".

Current affairs

Pool Moncloa/J.M.CuadradoWhen asked about the repercussions of the imprisonment of the former Vice-President of the Regional Government of Catalonia and several of the former regional councillors on the elections to be held on 21 December, the minister and Government Spokesperson remarked that this decision was taken by the judiciary which, in a democratic State such as Spain, is "independent and autonomous and outside of the scope of the government's sphere of influence", and added that what the government hopes for from holding these elections is that the "period of instability and deterioration of co-existence is brought to an end", and that the government that comes out of these elections "represents everyone".

The Minister for the Treasury and Public Function said that the approval of the draft law on the Basque Economic Agreement and the Basque Quota is not related to the approval of the General State Budget for 2018, and expressed his wish to see the Budget approved "in the first few months of 2018". To achieve this, he trusts that "as many political groups as possible will sign up to this, without renouncing any party".

Non official translation