Spain’s Senate Petitions Government to Suppress “Floor Clauses”
For those who are wondering what on earth is meant by a “Floor Clause” (Cláusula Suelo), we had already reviewed them in detail in our article 10 Common Abusive Clauses in Spanish Mortgage Loans (http://www NULL.marbella-lawyers NULL.com/articles/showArticle/10-common-abusive-clauses-in-spanish-mortgage-loans) and in Antonio’s blog post Reduction in Mortgage Repayments Limited by Floor Clause (https://belegal NULL.com/blog-by-antonio-flores/reduction-in-mortgage-repayments-limited-by-floor-clause/).
A “Collar” clause is when the minimum interest rate to be repaid to your lender in a mortgage loan is capped i.e. 4,5%. So even if the Euribor rate heads below, you still have to pay the said minimum interest rate. These clauses are the very reason on why many borrowers are not benefitting from the historically low Euribor rate to which most Spanish mortgages are referred to plus a spread (diferencial). We had already anticipated last year in our post, Steep Drop in Euribor Translates into Cheaper Mortgages, that lower mortgage repayments were to be expected in 2009. Many borrowers which were gleefully expecting to lower their monthly mortgage repayments in 2009 have come to know and dread this obscure clause which was worded in their Mortgage Deeds unbeknownst to them.
We had criticised these clauses as being basically abusive to borrowers because they were one-sided. The public outcry has been echoed at last at the Senate this morning.
This initiative was fostered by Senator Mr Francisco Javier Vázquez who belongs to Spain’s Conservative party. The Senate has pleaded that these abusive clauses ought to be removed in compliance with Spain’s new law on Consumers’ Rights, Law 1/2007 (http://noticias NULL.juridicas NULL.com/base_datos/Admin/rdleg1-2007 NULL.html), which was enacted by the current Socialist Government.
It is estimated that this initiative, if upheld by Spain’s Socialist Government, would benefit an estimated two out three borrowers translating into cheapermortgage repayments.
Source: El Mundo daily newspaper. (http://www NULL.elmundo NULL.es/elmundo/2009/09/23/suvivienda/1253700997 NULL.html)