The floor clause is a condition that includes or rather includes a large part of the Spanish banking system in variable rate mortgage loan contracts. When they are linked to the European benchmark, Euribor, or to other less relevant benchmarks. Their inclusion required the customer to pay a minimum rate or interest, independently of the evolution of the market. In other words, it could not benefit from the excellent performance of these financial assets. As is happening in recent years, where specifically the Euribor is in negative territory given that it presents a differential of -0.161%.
From this dynamic, if you had signed a mortgage of these characteristics, you would be paying more interest than you owed. Even when legally, even when with abusive implications as recognized by the Spanish judicial bodies. Not surprisingly, its main effect is that you would be paying a higher monthly payment than you should if the mortgage really adjusted to the conditions of the financial markets. Therefore, it is a very harmful clause for your interests as a bank user.
Based on this general scenario, the judgment of the Supreme Court of Justice of May 9, 2013 declared the floor clause void and forced the banking entities to return the overpaid from the date of the sentence. On the other hand, with the European ruling came full retroactivity that obliged credit institutions to return the amounts paid in excess from the beginning when contracting the loan.
How to identify this clause?
One of your missions as a bank user that you are is to identify if the mortgage you have just contracted carries the Floor clause. Fundamentally in case you could influence or repair this incident since it will make you pay more euros than initially contemplated. At the same time, hire the professional services of a law firm. Well, there are many signs that can provide you to understand if you are really facing a mortgage loan of these characteristics.
One of the most common materializes through the receipt from your bank. Because you can look at the concept "type of interest" that apply to you from this entity. Because in effect, if it exceeds the value of the Euribor plus the differential, it will be the definitive sign that you are facing a mortgage that truly has a floor clause.
Check with your credit institution
Of course another alternative is ask the bank directly where you have subscribed to this banking product. Not in vain, they have the obligation to confirm if you have a floor clause and explain to you, if you have one, what are the conditions of this kind of credits.
On the other hand, another very common scenario may arise among users of this class of products for financing a home. It is none other than that you did not have or you will not find the mortgage loan contract. Well, in this specific circumstance, you will have no other solution than to sue him. through the notary where you performed this procedure. In other words, the contract you signed. In this document you will find if the mortgage you signed has truly incorporated this abusive condition, which is the floor clause. Undoubtedly on your part and that will lead you to make a decision about it. Without nuances in connection with the presence of this term that generates so much controversy among Spanish users.
Review bank receipts
Using the examples above, you may not conclude that you are facing a floor clause on your home loan. Don't worry too much about this little information about your mortgage. You will have other little tricks that will make it clear from these moments that they are excessive problems in their formalization. One of the strategies you can use is based on something as simple as it is check the bank receipt of the last loan payment.
Well, within this simple operation, you should check from now on if the interest rate that appears as paid is not equal to the sum of the Euribor plus the agreed differential. Because through this procedure you will see if the mortgage subscribed has a floor clause, and what is more important what is the interest that will be constituted as a ceiling. And that it will not allow you to benefit from the falls in the European benchmark index to which most of the mortgages constituted in recent years are linked. Without having to go to other more complex information channels that may require greater knowledge of the contracts in this class of banking products.
Why are you interested in knowing this information?
It is truly very important that you collect this information because you may initiate some other procedural litigation against the financial institution in charge of selling this type of so special credits with respect to its purpose. Because actually, you must know from now on more than the Court of Justice of the European Union (CJEU) has supported the full retroactivity of the floor clauses. This is very important for any type of claim that you want to make from these precise moments.
Not surprisingly, one of the effects of this action by users means that from now on banks must return the excessive interest paid by customers whose mortgage had this clause. In practice, this means that if you find yourself in this situation, they will have to pay you back large amounts of money. As a result of the differences in the monthly installments that you must pay compared to those applied from the models with a floor clause. With which it will suppose that you leave very benefited from this new accounting operation.
What does a floor clause entail?
Whatever the case, it will be completely necessary for you to verify that you as a user assume that you have a floor clause in the mortgage loan. Because the differences between who pays it and what you have to pay are more than substantial, as you will be able to check from now on. Not surprisingly, we are talking about a very special clause that the bank can include in the mortgage when it is signed. Where the most remarkable thing is that it defines the minimum interest rate that you will have to pay even when the Euribor, the reference for most Spanish mortgages, is below.
So that you can check what a very abusive condition is like by financial institutions, nothing better than by means of a simple example. Even when the Euribor has fallen to 0.75%If the clause is 2%, the monthly rate is calculated by paying this rate. In other words, in no case will you be able to benefit from the fall in that index. How it has been developing in the financial markets in the last five years. Where the European benchmark index has even reached negative terrain and historical lows. Without you being able to take advantage of this scenario so favorable to your interests as a bank user.
Whatever the case, a large part of the banks has decided to lower the price of mortgages to remedy this incidence. This quickly translated into increasingly competitive spreads and some of them were even at levels very close to 2%. At the same time, eliminating a good part of the commissions and expenses in its administration or maintenance. To the point that you yourself thought you had signed a mortgage loan for the purchase of your very advantageous home. When in fact you were paying more demanding monthly payments than you really owed.
When are they not very transparent?
Another aspect that must be explained is whether these very special conditions are part of a supposed lack of transparency. In this regard, it cannot be forgotten that the floor clauses are legal when their full transparency is proven. In other words, that mortgages are written in a simple and fundamentally understandable way for all users. And secondly, that the bank itself has informed you before signing, both of this clause and of the consequences that it may develop in your national economy. Beyond other technical and even accounting considerations.
These types of conditions apply to variable rate mortgages, almost always linked to Euribor, which represent more than 92% of contracts established in Spain, according to the latest data from the Bank of Spain. Even though you should know that not all these mortgages have been marketed under conditions of little transparency.
Not surprisingly, this is one of the factors that are taken into account when filing claims in court. For this reason, it is different that they have a floor clause than that they have been developed with little transparency by banking entities. They are totally different things that you must value from now on and that can lead you to different strategies in the claim.