Mortgage floor clauses

Mortgage floor clauses

Millions of mortgages in Spain include the so-called floor clause, which establishes a minimum rate of interest which the holder of the mortgage is obliged to pay even if the sum of the reference rate (normally the Euribor) and the differential agreed produces a lower percentage than the one set by this clause.

In other words, it is a clause whose sole purpose is to protect the interests of the bank against any possible falls in the rate of interest such as the one we have been seeing for several years, which has left the Euribor at historical minimums. It has prevented the consequent cheapening of mortgages without offering the holders any kind of compensation.

Hundreds of sentences laid down by courts in Spain, including Supreme Court resolutions, consider the floor clause abusive and illegal, which throws wide open the possibility of claiming its nullity in law and the return by the financial entities of the money charged unduly.

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