Mortgage floor clauses in Spain

If you have a mortgage in Spain, you may have heard of the term floor clause, or cláusula suelo in Spanish. This is a condition sometimes included in mortgage agreements that sets a minimum interest rate, meaning your payments will never fall below a certain level, even if official interest rates drop. A lot of homeowners are unaware of these clauses when signing their mortgages, especially foreign buyers who rely on English-language guidance. If you’re unsure about your mortgage or concerned about a floor clause, speaking to English-speaking solicitors in Spain can help you understand the legal implications and determine whether your mortgage includes any unfair terms, ensuring your rights are fully protected.

How floor clauses work

Most mortgages in Spain are either fixed or variable-rate. Variable-rate mortgages are usually linked to a benchmark, such as the EURIBOR, plus an additional margin called a spread. Your monthly mortgage payment is calculated based on three components: the portion of the capital borrowed, the benchmark interest rate, and the bank’s spread. The spread represents the bank’s profit for lending the money, while for borrowers, it’s the cost of using those funds. To avoid unpredictable payments, some agreements include floor clauses that guarantee the bank receives a minimum interest, even if rates fall, while cap clauses protect borrowers from extreme increases. So, it’s always best to consult an English-speaking solicitor in Spain, like those on our team at Gascon Bernabeu, to make sure these clauses are fair and clearly explained and you know what you’re signing up for.

Why floor clauses became a problem in Spain

Floor clauses have been used in banking for years, but in Spain, their use became problematic around the early 2000s. During the property boom, banks were known to offer attractive mortgages to foreign buyers and Spanish residents alike, often advertising rates as low as “EURIBOR plus 0.5%.” As a result, many borrowers were lured in by the low monthly payments, assuming they would continue indefinitely. What they didn’t realise was that the small print of the mortgage included a floor clause, setting a minimum interest rate that significantly increased payments once the variable rate period began. So, unaware of these clauses, many people were left paying much higher rates than they ever expected to.

Borrowers’ experience with floor clauses

After signing these mortgage agreements, many borrowers initially enjoyed low monthly payments during the fixed-rate period, which usually lasted somewhere in the realm of a few years. However, once the mortgage switched to a variable rate, payments increased sharply due to the floor clause. Many homeowners contacted their banks, believing there had been a mistake, but were unfortunately told the charges were correct.

These clauses were often buried deep within long, complex contracts, making it nearly impossible for borrowers to understand them fully, especially if they didn’t consult the help of an English-speaking solicitor in Spain. The unfair nature of these clauses led to a wave of complaints and eventually court cases. If you’re unsure about the terms of your mortgage or you need legal guidance, we can review your contract and advise on the best course of action.

Legal response and the Supreme Court ruling

The Spanish courts eventually ruled that floor clauses included in many mortgage agreements were unfair if they were not explained clearly to borrowers. Even though the contracts were signed, the courts determined that essential clauses like floor and cap clauses must be discussed individually and clearly stated. The landmark ruling by the Spanish Supreme Court on May 9th, 2013, declared certain floor clauses illegal and set a precedent for borrowers to claim refunds for overpaid interest.

The ruling highlighted the responsibility of banks to make sure that future borrowers fully understood the terms of their mortgage. If you have been affected by your mortgage floor clause, and want to challenge an unfair floor clause and recover any amounts you have overpaid, you’ll need the help of an English-speaking solicitor in Spain.

How English-speaking solicitors in Spain can help

If your mortgage includes a floor clause, it’s important to get a second legal professional. At Gascon Bernabeu, our team of English-speaking solicitors in Spain can review your mortgage contract in detail, explain the implications of the floor clause, and assess whether it could be considered abusive under Spanish law. We can also guide you through the claims process, handle negotiations with the bank, and, if necessary, represent you in court. Each case is unique, which is why if you’re unsure, it’s always worth getting expert legal advice. This ensures you receive personalised advice tailored to your specific situation, which can differ significantly from other cases. We can help you protect your financial interests and ensure that any unfair terms in your mortgage are addressed effectively.

If you have any questions or need assistance with your mortgage floor clauses in Spain, feel free to reach out to us on +44 (0)20 3137 1320, info@gbabogados.co.uk, or via WhatsApp chat, or the contact form below, and a member of our team will be happy to assist you.