What is the Redal Law? Everything you need to know before signing your mortgage

The REDAL Law refers to “Rédito ad Líbitum” or “returns at will”, an expression that describes indeterminate or erroneous mortgage contracts. The proposal, which has not yet been approvedseeks to regulate certain aspects of mortgage contracts that have generated controversy for including unclear or directly abusive clauses that, until now, went unnoticed.

The law focuses on what are known as REDAL mortgages, characterized by including clauses that allow the bank to modify interest rates without restrictions. This lack of transparency is, without a doubt, a great source of conflict, leaving users with higher payments than they should and without fully understanding how their mortgage works.

How does the REDAL law work?

The REDAL Law will guarantee that mortgage loans are completely understandable to consumers. This includes reviewing old contracts, especially those signed before 2011to detect possible irregularities in the calculations of interest and outstanding capital. The law also aims to establish clear mechanisms that allow consumers to request the revision of clauses.

Regarding the specific regulation of contracts, banks must offer clear amortization tables and understandable, avoiding technicalities. Furthermore, they must facilitate efficient complaint channelsalso contemplated a sanctioning regime for those entities that fail to comply with these rules and the possibility of suspending judicial processes.

On the other hand, financial institutions will have obligations. They must demonstrate that clients were correctly informed about the conditions of the loan, offer realistic simulations and refrain from including ambiguous clauses in future contracts. The intention is to create new mortgage legislation based on transparency, although fines and compensation are also contemplated in case of non-compliance.

How will the REDAL law affect interest rates?

Although the proposal does not establish direct limits, the elimination of REDAL clauses and the obligation of transparency could reduce banks’ flexibility in setting variable interest ratesshorten the average duration of loans and change the initial conditions required to grant a loan so that they are longer.

For now, citizens interested in the REDAL Law should be attentive to the steps to follow in case of suspicion of abusive clauses, request information from the bank, raise complaints to the Bancari Customer Ombudsmanoy, if necessary, go to the Bank of Spain or to judicial means.