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RENTING

Renting in Spain: Can my landlord put up my rent due to rising inflation?

The war in Ukraine and record high inflation in Spain are resulting in many tenants having their monthly rent raised by the property owners. Is this legal?

Renting in Spain: Can my landlord put up my rent due to rising inflation?
Spain’s Urban Leasing Law allows the monthly rent paid by a tenant to be ‘updated’ in accordance with the IPC, but not always. (Photo by ANDER GILLENEA / AFP)

We’re living in uncertain financial times where conflict, a pandemic, rumours of another property bubble and other world events make it difficult to know what’s coming next and what it will mean for our wallets. 

What can be said for certain is that most living costs in Spain are getting more expensive this year.

In February 2022, inflation reached its highest level in 33 years – 7.4 percent – and Russia’s invasion of Ukraine has economists suggesting it will hit 10 percent this spring. 

One of the consequences of the rise of the IPC (CPI in English- Consumer Price Index) in Spain is that many landlords are using this general increase in costs to raise the rents of their tenants. 

With the current inflation rates, this can result in an average rise of €40 to €50 a month for renters in Spain. 

Is it legal to do this?

Yes, but only in certain circumstances.

Spain’s Urban Leasing Law allows the monthly rent paid by a tenant to be updated in accordance with the IPC.

However, this can only be done if previously agreed between tenant and landlord. It should also be clearly stated in the contract that the rent is subject to IPC changes.

In such cases, the lessor must wait for the first year of tenancy to have been completed for the IPC rise to be applied, and from then on only once a year and based on the most updated IPC amount. 

So if the tenancy contract was signed in February 2021 for example, the prearranged IPC update in the following years should also be in February.

Landlords can therefore not increase the rent several times a year or every month based on varying IPC rates.

The property owner will also have to give their tenant one month’s notice and apply the rise to the following month. This must be in writing and the landlord must state what the rent increase is and how it corresponds to correct IPC figures.

It’s important to remember that under no circumstances can a landlord increase the rent of a tenant by an amount higher than the IPC. The most updated IPC figure must always be applied.

Other indicators or reasons other than an IPC can be given by a landlord to increase the rent, but the amount they put the rent up by can’t be higher than the IPC under any circumstances.

Tenants should also keep in mind that if the IPC were to drop and they had pre-agreed with the landlord that the contract would be subject to IPC changes, they are within their rights to request a reduction of their rent.

The IPC (Índice de Precios al Consumidor) is published by Spain’s National Statistics Institute on a monthly basis and is based on the country’s latest inflation figures. You can easily check what rise or reduction applies to your property here

Spain’s Rental Negotiating Agency (ANA) has recommended that landlords don’t apply the latest so-called “war CPI” caused by the conflict in Ukraine, arguing that a large rise in rent could result in some tenants ending their rental contracts or struggling to pay.

One of the tools that tenants can use to lessen the blow of sky-high inflation is to tell their landlords that, if at all, they should apply the IPC de Vivienda (Property CPI) rather than the IPC General (General CPI), as the former is generally less volatile than the latter and Spain’s Urban Leasing Law does not specify which should be used to increase or lower rent.

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PROPERTY

What the Euribor rise means for property buyers and owners in Spain

The rise in the Euribor interest rate, used to calculate mortgage payments in Spain, is causing big changes in the mortgage rates.

What the Euribor rise means for property buyers and owners in Spain

Looking to buy property in Spain? Already a homeowner here? Well, you may have heard something about rising interest rates recently.

Or perhaps changes to the terms of your mortgage. Or the Euribor – but what is it, and what’s going on?

What is Euribor?

In Spain, Euribor is the interest rate most often used to work out mortgage payments and to calculate both variable and fixed rates.

It is anchored to the interest rate set by the European Central Bank, and, as we are now seeing, quite responsive to global economic events.

It’s the interest rate that banks in the Euro Zone use to lend to each other, so when the base rate goes up, the Euribor does too, which sends mortgage interest rates across the Eurozone rising. 

Rising rates

Most Spanish mortgages with variable rates normally vary based on a variety of factors, but this number has been rising and in May 2022 saw figures of 0.240 percent (Tuesday May 17th), well above the average. 

The rises throughout May are leading many in Spain, and indeed across Europe, to wonder how high their mortgage rates can go, and when the rises will stop.

Banco de España has estimated that the increases could range from anything between €35 a month to an additional €400. Bankinter predicts the Euribor rate will finish the year at a staggering 0.40 percent, but, more encouragingly, Caixabank’s prediction puts it at just 0.13 percent by the end of 2022.

On Euribor.com.es, a website that tracks the index on a daily basis, they suggest that the market consensus predicts the Euribor will finish at around 0.3 percent at the end of the year, but could reach as high 0.8 percent in 2023.

All of them agree, and most other economic indicators suggest, that whatever the figure at the end of the year, it will remain positive, so it seems almost certain that mortgages will continue to rise throughout 2022 at the very least.

This instability, in addition to global inflation and supply chain problems, could mean that mortgage rates will be affected at least until 2023, with some predictors even signposting 2024 as the possible end of a rise in mortgage prices.

With things uncertain in the mortgage industry, and the world economy more broadly, perhaps you’re thinking of ways to try and insulate yourself from the climbing interest rates.

How to protect yourself from the rising rates

One way to weather the storm of interest rate increases is to change your mortgage from a variable to a fixed rate, either by negotiating with the your bank or by changing bank altogether – a process known as subrogation.

According to data from MyInvestor, during March and April the number of subrogations has started to rise.

Subrogation basically means switching the mortgage from one bank to another to change its interest rate. Although it does involve certain charges in order to do so – you pay the valuation of your house, which normally costs a few hundred euros, and a fee charged to the bank you are leaving, which can cost up to 2 percent of the outstanding amount – it could, and probably would, work out cheaper than paying the hiked interests rates over time.

You could also try and take out a new mortgage with another bank and use the borrowed money to settle the loan. This is, of course, a more expensive option as you have to pay the appraisal, the commission for early repayment of the current credit (again, up to 2 percent of the outstanding amount) and the expenses associated with its cancellation of registration, which normally runs to around €1,000.

READ ALSO: Spanish mortgages – Ten things foreigners should know before getting one

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