All you need to know about the “Clausula Suelo”
In recent months you may have heard the term “Clausula Suelo” in the Spanish news or seen the images of protesters waving banners proclaiming “Clausula Suelo NO!”
It may mean little to you however, if you have a mortgage in Spain, or if you have had a mortgage at any time since 2009 the phrase may prove to be very significant.
What is the Clausula Seulo?
“Clausula Suelo” quite simply translates as “floor clause” and refers to a condition that many (but not all) Spanish mortgage payers will find in their mortgage terms.
Most mortgage interest rates are paid at a fixed rate over the Euribor (the rate set by the European Central Bank). During the later part of the Spanish Boom this gave Spanish banks a relatively strong return on their lending, however the Clausula Suelo was incorporated to protect the banks income if the Euribor dropped below a given level.
For example (using round numbers for ease of explanation) a mortgage may have been agreed with a rate of 1% over the Euribor with a “Clausula Suelo” setting the minimum base rate of 1%. So long as the Euribor stayed above 1%, the “Clausula Suelo” would not make a difference to the interest rate paid by the borrower, however, if the Euribor dropped below 1% then the “Clausula Suelo” would prevent the overall interest rate paid by the borrower from falling below 2%.
This is demonstrated using the graph below. The yellow line represents the Euribor, the green line represents the interest rate paid over the Euribor by the borrower. The red line represents the “Suelo” (the blue shaded area is the excess interest paid).
As the Euribor rises, the interest rate payable rises with it, as it falls the interest rate payable falls too until the Euribor falls below the “Suelo” at which point the payable rate stops falling.
Why has the “Clausula Suelo” been in the news so much?
To cut a long story short, the banks have been told by the courts that the clause is unfair.
The Spanish Supreme Court has dictated (following advice from the European Court of Justice) that interest rates paid by borrowers should have fallen in-line with the Euribor. Firstly banks can no longer use the “Clausula Suelo” in new mortgages or continue to enforce it in existing mortgages however, perhaps more importantly, the banks must refund any extra interest paid as a result of a “Clausula Suelo” i.e. the part shaded in blue in the diagram above.
As the Euribor rate has been set very low since the start of the financial crisis, this can add up to a considerable sum of money per borrower and estimates are that the banking system as a whole may need to refund up to 7 billion Euros.
How does this effect me?
Quite simply, if you have a mortgage with a Spanish bank, which includes a “Clausula Suelo” or you have had a mortgage at any point since 2009 (you may have started it before then) then you will likely be due a refund from your mortgage provider.
How much will they owe me?
This is a impossible question to answer without knowing the details of any given mortgage, the figure will be affected by the amount borrowed, the term of the mortgage, the interest rate agreed and the level at which the “suelo” was set.
Following an earlier court ruling in 2013, some banks stopped enforcing the clause, in the case that your mortgage was with one of those banks then you will still be entitled to be repaid any extra interest paid before that ruling.
If you are entitled to a repayment then the bank will also have to pay you interest on the amount that you overpaid.
In some cases the figure can be tens of thousands of euros, in many it stretches into the thousands. The diagram below gives an estimation of the average reclaim amounts from several banks.
How do I know if I am due any money?
If you have a Spanish mortgage the first thing you will need to do is establish whether it included a “Clausula Suelo”.
Unfortunately it isn’t just as simple as looking through your mortgage agreement and finding a paragraph titled “Clausula Suelo”. “Clausula Suelo” is simply an expression to describe a type of clause. In different agreements it will be worded differently; the importance lies in the effect that the clause has on your interest payments.
Secondly you will need to establish that the clause was “abusive”. As in the UK, freedom of contract allows parties to agree to terms as they wish, whether one party gets a bad bargain is not normally the concern of the court however it does become a matter for the court is one party abused their position of power or influence over the other weaker party. It is likely that upon acknowledging that a floor clause exists, the bank will deny that it is abusive. A solicitor will be able to help you establish your argument to the contrary.
Finally you need to establish how long the clause was enforced for and how much you overpaid. This is a relatively simple calculation which can be made once you have established the terms of your mortage and the date (if one exists) that the bank removed the clause.
Will the bank just pay up?
Banks are starting to pay back the money due however they will not simply credit it to your account without you having to do anything. The total liability across all the banks is very large and they will try to avoid having to pay out if they can. Some banks are offering to credit outstanding mortgage balances, some are offering smaller amounts than the amount due for a fast payment and threatening to go to court to avoid paying the full amount.
There will be a level of negotiation needed to secure the full amount payable to you as quickly as possible.
Where do I start?!!!
Our in-house team of qualified Spanish Lawyers at Laddr international will be more than happy to offer a free consultation to establish whether you have a claim and, if so establish the amount that you can claim back.
If you are due money, with your instruction, we can then approach your bank to negotiate the repayment. We do not need a huge amount of information from you to establish your claim and can respond with initial advice very quickly.
FOR A FULL INFORMATION PACK DETAILING THE PAPERWORK YOU WILL NEED TO FIND AND THE PROCESS OF MAKING A CLAIM, PLEASE FILL OUT THE FORM BELOW:
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