The euribor exceeds 3%: how much your mortgage would increase in September and what you can do

In Spain, both novation and mortgage subrogation are mechanisms to modify the conditions of an existing mortgage, but the procedure and the parties involved differ slightly. Below are the usual procedures in each case and the general steps you will need to follow.

1. Basic difference between novation and subrogation

• Novation: you modify your mortgage with the same bank. You can change the interest rate (from variable to fixed or mixed), margin, term, amortization system, etc.
• Creditor subrogation: you transfer your mortgage to another bank that offers better conditions. The debt remains, but the financial institution changes.

2. Common preliminary procedures (for novation and subrogation)

Before starting any operation, it is advisable to follow some steps that, although not strictly “bureaucratic,” are essential in practice:

• Review of your current mortgage: analyze the deed, interest rate, remaining term, early repayment or novation/subrogation fees, and linked products (insurance, cards, etc.).
• Simulations and offers: compare offers from other entities (for subrogation) or proposals from your own bank (for novation). Request binding offers in writing.
• Cost calculation: review commissions, notarial and registry expenses, appraisal, and, if applicable, the tax on documented legal acts (usually borne by the bank in improvement operations, but each case must be verified).

3. Procedures for a mortgage novation

If you agree with your entity to modify the mortgage, the usual steps are:

• Formal request to the bank: you submit a novation request indicating what you want to change (interest rate, term, installment, etc.). It is usually accompanied by updated income documentation (pay slips, income tax return, employment history).
• Risk assessment by the entity: the bank reevaluates your profile and the collateral (it may require a new appraisal of the property).
• Binding novation offer: if the bank accepts, it issues a document with the new conditions. You must review it carefully.
• Prior notarial intervention:
  • You will have the right to receive the pre-contractual documentation (personalized information sheet, etc.).
  • You can visit the notary in advance for free advice on the new conditions.
• Signing of the novation deed: you and the bank’s representative go to the notary to grant the public deed that records the modifications.
• Registration in the Property Registry: the deed is registered so that the new conditions have effects against third parties; this is usually managed by the entity itself or a management company.

4. Procedures for a mortgage subrogation (changing banks)

Subrogation is somewhat more complex because two banks are involved: your current one (outgoing) and the new one (incoming):

• Application to the new bank: you submit the mortgage you want to subrogate and your financial documentation. The new bank studies the operation.
• Binding offer from the new bank: if approved, they will send you a proposal with the interest rate, term, commissions, and other conditions of the subrogated mortgage.
• Notification to the current bank: the new bank notifies your entity that it wants to subrogate the mortgage. From that moment, your bank has a legal period to match or improve the offer (right of amendment or improvement).
• Response from the outgoing bank:
  • If it does not match the offer, the subrogation proceeds with the new bank.
  • If it matches or improves, you can decide to stay with your bank under those new conditions; in practice, this usually amounts to a novation.
• Pre-contractual documentation and notarial advice: as in novation, you will have the right to receive detailed information and a prior appointment with the notary to resolve doubts.
• Signing of the subrogation deed: at the notary’s office, the deed is granted by which the new bank becomes the creditor of your loan.
• Registry cancellation of the mortgage with the previous bank (if applicable): subrogation usually implies a change of creditor, maintaining the charge, but it can be accompanied by cancellation and constitution of a new mortgage depending on the chosen structure. In any case, it must be recorded in the Property Registry.

5. Expenses and practical recommendations

• Appraisal: usually necessary; paid by the client unless otherwise agreed.
• Notary and Registry: in many improvement operations, most of the expenses are borne by the entity, but it is important to check this explicitly.
• Commissions: review the novation or subrogation commission and, if applicable, early repayment fees, as they can affect real savings.
• Independent advice: if the operation is complex or you have doubts, it is advisable to compare conditions with a financial advisor or a consumer association.

The European Central Bank (ECB) is the institution responsible for the monetary policy of the euro area. Its key power regarding interest rates is to set and modify them to ensure price stability across the countries that use the euro, in accordance with the Treaties of the European Union.

Legal basis and main objective

The ECB's powers regarding interest rates mainly derive from the Treaty on the Functioning of the European Union (TFEU) and the Statute of the European System of Central Banks (ESCB) and the ECB. The ECB's primary objective is to maintain price stability, understood in practice as low and stable inflation over the medium term. To achieve this objective, the ECB designs and implements the single monetary policy of the euro area, with official interest rates as its main instrument.

Unlike the national central banks that operated before the introduction of the euro, in euro area countries the power over monetary policy interest rates has been centralized in the ECB. National central banks participate in execution but do not autonomously set these rates.

Official interest rates set by the ECB

The ECB decides on three fundamental official interest rates:

• Main refinancing operations (MRO) rate: this is the key reference rate. It remunerates (or charges) the money that the ECB regularly lends to commercial banks in the short term, usually for one week. It acts as the “basic price” of money in the euro area.
• Marginal lending facility rate: this is the rate at which banks can obtain emergency financing, overnight, from the Eurosystem. It is usually set above the MRO rate and acts as the ceiling of the very short-term interbank market rate range.
• Deposit facility rate: this is the rate at which banks can deposit their excess liquidity at the central bank overnight. It is normally set below the MRO rate and acts as the floor of the very short-term market rate range.

By setting these three rates, the ECB directly influences banks' financing conditions and, indirectly, the interest rates applied to businesses, households, and public administrations (loans, mortgages, business financing, etc.).

Exclusive competence and independence

The euro area's monetary policy is an exclusive competence of the European Union. This means that neither member states nor other institutions can set or impose a certain level of interest rates on the ECB. The decision-making body is the ECB Governing Council, composed of the members of the Executive Board and the governors of the national central banks of the Eurosystem.

The ECB enjoys very strong institutional independence. Neither national governments nor other EU institutions can instruct the ECB on how to set rates. In exchange for this independence, the ECB has transparency and accountability obligations (for example, regular appearances before the European Parliament), but the technical decision on interest rates is its own.

Criteria and scope of interest rate decisions

When deciding interest rates, the ECB analyzes inflation trends and forecasts, economic growth, the labor market, financial conditions, and risks to price stability. Its mandate is formulated over the medium term: it does not aim to control inflation month by month but to guide it toward its target over several quarters or years.

The scope of the ECB's decisions is broad:

• They affect all euro area countries equally; it cannot set different rates for a specific state.
• They impact the cost of bank financing, the euro exchange rate, the yield on public and private debt, and monetary conditions in general.
• They are coordinated with other instruments (such as asset purchases or longer-term liquidity operations), but official interest rates remain the core of its action.

In summary, the ECB has the exclusive competence to set and modify the official interest rates of the euro area, does so independently of governments, and with the central objective of maintaining price stability, using these rates as the main lever to influence the monetary and financial conditions of the entire economy.

In Spain, the modification of mortgage conditions (modificative novation) is heavily regulated to protect the borrower. The main regulatory basis is Law 5/2019, on real estate credit contracts (BOE 16-03-2019), its development by Royal Decree 309/2019 (BOE 29-04-2019), Order EHA/2899/2011 on banking transparency (BOE 29-10-2011), and the Mortgage Law (consolidated text approved by Decree of February 8, 1946, BOE 27-02-1946).

1. Need for agreement and form of modification

• Express consent of the borrower: the entity cannot unilaterally change essential conditions (interest rate, term, commissions, guarantees, etc.) unless these are clearly foreseen and accepted in the initial contract (for example, reference to an official index). Novation is a bilateral agreement.
• Public deed: relevant modifications of the mortgage loan must be formalized before a notary, in a public deed, to be registrable in the Property Registry. The Mortgage Law requires a public title and registration for the mortgage to be effective against third parties.
• Registry inscription: novation affecting term, interest rate, mortgage liability, or other guarantee elements must be registered; the registrar will assess the legality of the title and clauses, applying consumer protection regulations.

2. Pre-contractual information and transparency

Law 5/2019 and Royal Decree 309/2019 strengthen the phase prior to signing, also when modifying a mortgage:

• Pre-contractual documentation: the entity must deliver, with sufficient advance notice, the European Standardized Information Sheet (ESIS), the Standardized Warning Sheet (FiAE), and other required documentation (installment simulations, expense breakdown, etc.), adapted to the new conditions.
• Minimum reflection period: for operations subject to Law 5/2019, documentation must generally be delivered at least 10 calendar days before the notarial signing.
• Clarity requirements: Order EHA/2899/2011 and its development require that information be clear, accurate, and understandable, with special attention to risks of interest rate variation, complex clauses, and linked products.

3. Notarial intervention and transparency control

• Free notarial advice: Law 5/2019 assigns the notary the function of impartially advising the borrower, resolving doubts, and verifying that deadlines and information obligations have been met. This assistance has no additional cost for the client.
• Prior material transparency certificate: before signing the new deed, the notary issues a certificate stating that the borrower has received the documentation, understands the economic and legal scope of the new conditions, and has been informed of especially relevant clauses (interest rate, early maturity, default interest, etc.).
• Proof of compliance: the certificate and deed constitute proof that the bank has fulfilled its information obligations and that the client has been able to exercise their right to understand the operation.

4. Limits on interest rates, commissions, and clauses

• Interest rate and floor/ceiling clauses: the entity must respect limits and material transparency requirements. Following case law on floor clauses, the regulations insist that any limitation on rate decreases or caps on increases must be clear, highlighted, and understandable; otherwise, they may be null due to lack of transparency.
• Early repayment commissions: Law 5/2019 sets maximum percentages and time periods for early repayment fees, differentiating between fixed and variable rate mortgages. In many cases, novation to switch from variable to fixed rate has especially favorable treatment.
• Reference indices: Order EHA/2899/2011 limits the indices that can be used in variable rate loans to those meeting certain objectivity and non-manipulability requirements (Euribor, official rates, etc.). A change of index must comply with these criteria and be explained with simulations.
• Linked sales and combined products: the loan cannot generally be conditioned on contracting other products, except in very limited exceptions. Combined sales are allowed if the loan is also offered under separate conditions and the combination is objectively beneficial.

5. Supervision and claims

• Supervision by the Bank of Spain: failure to comply with transparency and information obligations may lead to administrative sanctions under Law 5/2019 and Law 10/2014.
• Claims procedure: the client can first complain to the entity's customer service and then to the Bank of Spain or alternative consumer dispute resolution systems, without prejudice to going to court to challenge abusive clauses or the novation itself.