Reduction in Mortgage Repayments Limited by Floor Clause
With the reduction in interest rates, currently just under 2%, many of us may have realized that our repayment has not gone down as much as it should have. The reason for this is that some mortgage loans included mortgage “floor” clauses (“cláusula suelo” in Spanish) which limited the reduction to a maximum, not allowing borrowers to fully benefit from the drop in rates. For a €200,000 mortgage this would mean you could be paying €6,000 yearly more in interests (calculations made for a “floor” set to 5%).
After making some enquiries it appears that these went unnoticed for mortgage brokers as they were written in the “small print”. If the above clause is in application it would be convenient to talk to the bank to have it removed, so we recommend that you approach your bank to find out if there is one and challenge it, requesting that it is eliminated. We do warn that it will not be easy to persuade the bank to reduce their earnings but it is well worth a try, even under the threat of stop paying the installments!