Banks restrict mortgage subrogation and push purchasers to open new loans | Financial Markets | EUROtoday

Whoever has a mortgage has in all probability visited – bodily or just about – different banks to test if by altering entities they’ll get a decrease rate of interest than the one they presently pay. The course of is widespread and has been practiced for years: the financial institution is considering attracting a brand new consumer with a mortgage that can bind them for many years, and the borrower can save amount of cash in curiosity.

Traditionally, this variation is made by subrogation, a mechanism that enables a mortgage to be transferred from one financial institution to a different. But in current months monetary establishments are limiting this route. The financial institution’s most well-liked technique is for the consumer to cancel their present mortgage and signal a brand new one with the entity that gives higher situations. For the financial institution it means decreasing prices; For the consumer, assume extra bills.

With subrogation, the receiving financial institution assumes many of the formalization prices. On the opposite hand, when opening a brand new mortgage, the consumer should face some extra bills, such because the appraisal of the house or the registration cancellation of their outdated mortgage. In addition, the contract could embody an early termination charge, though that is restricted by legislation. The sensible consequence is that many mortgage holders are being pushed to cancel their mortgage and apply for a brand new one to acquire a greater rate of interest.

“It is more expensive for the client to cancel and contract a new mortgage than to make a subrogation, since they have to assume more associated expenses and commissions (registration cancellation, notary, registration, management, appraisal). Although most banks have mortgage subrogation simulators in their digital channels, in practice, canceling and contracting a new loan could be the only possible option to achieve a real improvement in the interest rate and conditions,” explains Gabriel Rodríguez Lorenzo, co-founder of the monetary comparator SinCommisiones.

Sources from 4 banks verify that this can be a widespread observe within the sector, pushed each by value financial savings and by the potential for accelerating deadlines, since subrogation normally entails extra procedures that lengthen the method. The knowledge helps this development: in response to the National Institute of Statistics (INE), within the first six months of 2025, some 4,700 surrogations had been registered, virtually half (-48%) of the greater than 9,000 carried out in the identical interval of 2024.

“Subrogation limits the room for maneuver of the new entity, since it must assume an inherited contract with already agreed conditions. On the other hand, in a cancellation and contracting of a new mortgage, the new entity can apply its current policy and link the client with new products, which impacts the profitability and loyalty of the new client,” provides Rodríguez Lorenzo.

Margins to the restrict

The market context performs an essential position. Spanish banks presently supply the second most cost-effective mortgage costs within the euro zone, which leaves very tight margins and really sturdy competitors on this enterprise section. According to the newest knowledge from the European Central Bank (ECB), the typical rate of interest on mortgages granted in Spain in August was 2.68%, considerably decrease than the three.3% common within the eurozone. This signifies that it’s cheaper for purchasers to borrow in Spain, however for banks the margins are narrowing. The CEO of Bankinter, Gloria Ortiz, assured this week that mortgage competitors is turning into “a little irrational.”

Therefore, so as to supply aggressive and worthwhile situations, entities have discovered a strategy to barely cut back the prices related to subrogation, transferring a part of them to the consumer in the event that they select to open a brand new mortgage. As defined by the identical sources, it’s a course of by which each win: the financial institution saves prices, time and procedures within the administrative course of and the consumer will get a cheaper price than what they’re paying.

In truth, they level out that the banks’ desire for purchasers to cancel their mortgage and open a brand new one can also be as a result of a strategy to pace up the method. Subrogation is slower and extra cumbersome at an administrative degree as a result of the supply and vacation spot banks must alternate paperwork. In many instances, it could possibly take a number of months to finish, whereas opening a brand new mortgage permits the phrases to be accelerated, one thing particularly invaluable in an surroundings the place rates of interest can fluctuate quickly in step with the Euribor.

They additionally level out that in a subrogation the financial institution of origin has the precise to make a counteroffer. The process requires {that a} binding supply be despatched, that the financial institution of origin research it and resolve whether or not to match it or enhance it. The authorized interval is 15 calendar days. The resolution to remain or go to a different entity corresponds to the consumer. But throughout that point, you proceed paying your traditional charge, and if the Euribor varies, the brand new financial institution’s preliminary supply could possibly be old-fashioned, forcing you to restart the method.

“The difference is that subrogation is usually cheaper in terms of expenses, but limited because you depend on the bank of origin. Canceling and opening a new mortgage has some extra cost such as cancellation of registration, but in exchange it gives you total freedom to choose the bank and conditions. In many cases, what you save in interest more than compensates for that initial expense,” explains Jorge González-Iglesias, CEO of the monetary recommendation platform Gibobs.

The professional particulars that in order that the consumer doesn’t lose out with the change, earlier than making a subrogation or canceling and opening a brand new mortgage, you will need to request a binding supply from the brand new financial institution and be clear concerning the medium and long-term financial savings accounts. “To really improve current conditions, in addition to getting a lower interest rate, it is also interesting to reduce the monthly payment, shorten the term or eliminate unnecessary commissions,” he provides.

Since 2019, surrogacy had grow to be a elementary mechanism. That 12 months the brand new Mortgage Law got here into power, which sought to extend competitors between banks and make it simpler for customers to enhance their situations with out assuming extreme prices. Inspired by the thought of ​​mortgage portability, the rule meant to make it simpler to alter entities when one other provided a extra favorable rate of interest. It additionally sought to ascertain a fairer distribution of mortgage bills, reinforce transparency in contracting and shield the patron in opposition to abusive clauses.