Floor clause rates – Are you paying the correct interest on your mortgage loan?

Dear readers, if you have a mortgage loan in Spain, it is very possible that you are overpaying interest. Literally thousands of customers have been adversely affected by mortgage floor interest clauses and many are not even aware of it.

As we have explained on several occasions, a mortgage floor rate or minimum interest clause, is one in which a minimum interest rate is set.  Even though the interest rate of reference of the loan decreases, the interest payable by the consumer never falls below the minimum fixed on the loan agreement (the most common rate of reference is the Euribor and currently stands in negative value, approximately -0.010%) .

Although floor clauses are not illegal, they are causing a significant loss to most affected by them, since they cannot take advantage of falling interest rates. Many had no real knowledge about the severe cost from the economic and financial point of view that such clauses could cause them, (and in fact have caused them) when they originally signed for the loan.

This is because banks showed an absolute lack of transparency when they did not explain to their customers the potential economic damage that these clauses could mean, those affected thought that they were signing a variable interest loan, when in fact they could not benefit from interest rates dropping.

Usually these clauses are not highlighted, and remain “concealed”, hidden in very extensive and difficult to understand mortgage deeds.

For the reasons given above, the Spanish Supreme Court has repeatedly ruled in favour of nulling these contracts in judgments from 9th May 2013 and 25th March 2015. This means that if the bank did not inform you correctly regarding these floor clauses, then the chances of your success if you claim in court are very high.

Now, the main question to be answered, is the extent of the retroactivity of the declaration of nullity. Although the Supreme Court has indicated that the bank should return overpaid interest from May 2013 only, many provincial Courts (Appeal Courts), including the Province of Alicante, are agreeing to ask the bank for a repayment of wrongly paid interest all the way back from the beginning of the loan. In this regard we expect the ruling of the Court of Justice of the European Union to arrive in the coming days, possibly on the 26/04/2016.  We will analyse this judgement in a later article.

Send us your mortgage loan deeds and your last receipt, and we will confirm you if you are affected or not.


The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.


Carlos Baos (Lawyer)

Spanish Law firm solicitor attorney barrister.

Alicante, Denia, Costa Blanca Marina Alta

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