1-minute guide to Spanish Mortgage Floor Clause Claims

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Spanish Mortgage Floor Clauses

There are approximately 319,000 British expats currently living in Spain who make up 21% of the Spanish foreign property buyer’s market.However, 2.5million Spanish mortgages contained a hidden clause which unexpectedly capped minimum repayments above the interest rate advertised.Read on to find out how to discover if you’re affected and what you can do about it.

Need to know

  • Certain tracker mortgages advertised interest rates as being based upon the centrally set EURIBOR interest rate.
  • However what homeowners were not told, is that their mortgage contained a ‘floor clause’ or ‘clausula suelo’ which capped the minimum interest rate in order to protect banks from negative interest rates.
  • This meant that after the initial fixed rate introductory period, mortgage payments rocketed and many homeowners were forced to pay thousands of euros more than expected.

How were they mis-sold?

  • As these clauses contained essential information about interest rates, they had to be fully explained before the contracts were signed and made clear.
  • However, the floor clauses were often hard to locate and were hidden amongst Spanish language small print meaning British buyers had to have the full documents translated and examined by a solicitor to discover the clause.
  • In 2013 a judge in Madrid ruled that the floor clauses in the mortgage contracts of Spain’s second biggest bank, BBVA, were abusive.
  • In April of this year a Madrid judge went one step further and ordered 40 of Spain’s biggest lenders to refund borrowers extra interest paid on mortgages dating back to 2013.
  • This historical ruling means that it’s possible for mortgage holders to retrospectively claim back overpayments dating to 2013.
  • If interest rates dropped but your mortgage repayments stayed the same, you could have a floor clause in your contract.

What can I do?

  • Due to the complex nature of this type of claim it can be hard to do yourself but it is possible. However, the best course of action is to seek legal advice first and familiarise yourself with your bank’s complaints procedure.

The inside track

  • The clause is thought to add an extra €3,000 a year to mortgages making the average claim €9,000
  • It’s estimated that 90% of Spanish evictions are the result of hidden floor clauses
  • A ruling from the EU this year is expected to determine whether mortgage holders can claim back further than 2013.
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Sarah Willingham
Sarah Willingham is a serial entrepreneur, business investor and leading consumer expert. She has received a number of accolades for her contribution to business including The Sunday Times 500 Most Influential People in Britain 2016, The Times 35 Most Successful Women Under 35, Business Weekly’s Young Entrepreneur of the Year, Courvoisier Top 500 and an entry into the Who’s Who of British Business Leaders. She holds three business degrees including an MBA from Cranfield School of Management, where she is also an advisory board member.