The price war to attract new mortgage borrowers has revived an old tactic: flaunting the nominal interest rate (NIR) while burying the annual percentage rate (APR) in the small print. It is a deeply misleading strategy that leaves thousands of families believing they have secured a “cheap” mortgage, only to pay many thousands of euros more than expected.
The "cheap" NIR trap
Ads promise a nominal interest rate (NIR) of 1.5%, 1.8%, 2% – figures that seem irresistible.
Yet behind these offers lies the small print, where what truly matters is concealed: the annual percentage rate (APR), which reflects fees, compulsory insurance, associated costs and unrealistic bonuses. Look at the APR, and the picture quickly changes.
Three examples of NIRs that seem cheap
Mortgage with a nominal interest rate (NIR) of 1.7%... and an annual percentage rate (APR) of 4.3%
An advert for a “super-competitive” mortgage boasting a 1.7% APR – but only if you accept:
- Home insurance at €450 a year
- Life insurance at €600 a year
- A salary account that incurs fees if the balance falls
- Valuation and opening fees not included
With these conditions added, the APR is up to 150% higher than the nominal interest rate. Families who thought they were taking out a cheap loan then discover that the real cost is more than double.
A "no-fee" mortgage that hides… a 1% fee if you prepay.
Another advert boldly proclaims: “0% commission. 2.1% APR. Everything is clear from day one.” Yet the contract contains a discreet clause: a 1% early-repayment charge from the second year onwards.
For a household that receives an inheritance or decides to sell its home, this can mean an extra €2,000 to €4,000. Under these real-world conditions, the APR rises from the advertised 2.1% to 3.8%.
Mortgage with a “miraculous” APR of 1.4%… but only if you accept 5 mandatory products
Some mortgages go so far as to require:
- Life insurance
- Home insurance
- Payment protection insurance
- A pension plan with a minimum annual contribution of €1,200
- A card with a minimum annual spend of €3,000
If you do not take out the full package, the nominal interest rate (NIR) rises to 1.5% and the true annual percentage rate (APR) exceeds 2.9%. Yet the advertisement continues to flaunt only the 1.4%.
What nobody wants to tell you
The NIR is merely the lure; the APR is the figure that reflects what you will actually pay.
And while the law requires the APR to appear in advertising, it says nothing about font size, allowing many banks to conceal it so that few people notice it.
Practical tips
If an advert highlights only the nominal rate, be wary. Before signing any mortgage, check the APR, ask about all incentives, calculate the cost of insurance and related products, and review opening, early-repayment and subrogation fees.
The Spanish mortgage market is seeing a new wave of flashy advertising and fine print. The tactic works by luring customers with seemingly unbeatable rates – but if you fail to read the small print and check the APR, you could end up paying tens of thousands of euros more.