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febrero 9, 2016
The Floor Clause is a limitation to the lowering interest rate on the Spanish mortgage loan with a variable interest rate. The term “floor clause” does not feature in the mortgage deed but does so in the text, which defines the scope. For this reason there are a lot of people who did not know (or do not know) that they signed this clause.
Most mortgage loans taken in Spain have an interest rate established on the basis of a reference rate, particularly the Euribor rating, although other rates like IRS (Interest Rate Swap) or IRPH (Mortgage Loans Reference Rates, Índice de Referencia de Préstamos Hipotecarios in Spanish) are also used along with differential, which varies based on the bank entity.
Thus, it is known that a “mortgage floor” fixes a minimum percentage even though the emerged rate from the aggregate of the Euribor and the differential is lower. Sometimes in addition to the floor a “mortgage roof” is applied. It involves a maximum interest to pay which normally is much higher than the usual market figures. For example, a mortgage loan could have a “roof” of 12% while the Euribor value has never exceeded 5% in Spain.
In the last few years judgements in favor of the floor clause have been rendered at the mercantile courts and provincial high courts. Furthermore, in the judgements state that the overpaid amounts by the people concerned will be refundable.
Thus, the Supreme Court dismantled the floor clause imposed by the banks in the recruitment mortgages when it considered it “abusive”, “incommensurate” or “unclear” consequently of an OCU (Costumer & User Organization, Organización de Consumidores y Usuarios in Spanish) complaint in 2010. This fact was a gateway for other judgements. Since then, judgements at the mercantile courts against the floor clause have been gradually increasing. In all of them, the magistrates have emphasized that this clause is “vexatious”.
May of 2013 marked a turning point in the floor clause application. On 9th of this month, this clause was pleaded illegal by the Supreme Court in 400.000 contracts from BBVA, 90.000 from Novagalicia Bank and in 100.000 from Cajamar. The key reason for this was lack of sufficient clarity and transparency.
In October of 2015, the European Commission sent a document to the Justice Court of European Union and requested that the amounts overpaid because of the floor clause are given back to the clients.
Have you applied for a Spanish mortgage and you are not sure whether it has unfair terms? Contact us and we will look over your mortgage for free, formalize your claim against the bank and you will be able to recover the overpaid amounts with no upfront payment.