SPANISH MORTGAGE CONTRACT

Do you have a minimum interest rate clause in your Spanish mortgage contract? Are you aware that this could be costing you approximately €2000 annually? Throughout 2012 the Mercantile Court in Málaga has dictated 7 sentences ordering three banks to pay back considerable sums of money which they were illegally charging their clients through what is called “minimum interest rate clause” stipulated in their mortgage contracts. The truth is that in this mortgage contracts it is established that at no point in time can the variable rate be inferior to a minimum rate fixed by the bank – this tends to be between 3 and 5%, whilst on the other hand the maximum limit is unrealistic – in the majority of cases this is between 7 and 15%. The detriment to the consumer arrives when the Euribor descends below the minimum rate stipulated in the mortgage contract – particularly at this moment in time seeming as the Euribor has descended below 1% - and the client has to continue paying as if it were at 3 or 5% because of this “minimum interest rate clause” imposed by the bank. However, the maximum rate will never be reached meaning that the consumer will never benefit from it and the only beneficiary will ever only be the bank. This banking practice trespasses on the very fundamental principles of contractual good faith and provokes a substantial and unjustified imbalance of contractual obligations, generating a loss in the economy of Spanish consumers at the same time. In fact this same minimum interest rate clause has been mainly responsible for the progressive decline of the Euribor; (this being the main variable mortgage reference rate) not having led to a widespread drop in monthly payments. Source: MARTINEZ ECHEVARRIA I PEREZ I FERRERO ABOGADOS www.martinezechevarria.com