The Spanish Supreme Court has set-out rules that the banks must comply with in order that they may rely on the so-called ‘Cláusulas Suelo’ , which are clauses in the mortgage agreement which allow the banks to limit the extent to which their borrowers can benefit from the extremely low interest rate environment currently prevailing in Europe and beyond.
Most variable mortgage rates in Spain are set with reference to the Euribor rate, an average based on what 50 European banks pay to borrow. In Spain the banks have tended to establish in the mortgage agreement a minimum interest rate, regardless of whether the Euribor goes even lower.
‘Cláusulas suelo’ have been a bone of contention for some time and judges in the lower courts have agreed, forcing banks to appeal up through the Courts, with the matter finally being addressed by the Spanish Supreme Court in Madrid, in May this year.
The decision sets a precedent that must be followed by all lower courts and the specific case referred to the Supreme Court involved the BBVA, NCG and Caja Rurales banks. While the clauses did not constitute an ‘unfair term’, they did need to be ‘comprehensible’ and ‘transparent’.
Conditions for Inclusion
In it’s decision the Supreme Court stressed the need for any such clauses ‘to pass the test of transparency with regard to the fact that it is included as a general condition of the contract…’
In the case before it, the Court decided that the relevant clauses were null and void since they were not transparent as they were bundled together with the opposing “Ceiling clauses” which restrict the upper limit of interest payments in an apparent ‘quid pro quo’ In addition, there were no simulations offered as to the financial impact the clauses might have.
Also important according to the Court was the fact that there was no ‘clear and comprehensible’ information given regarding the comparative cost of the mortgage as opposed to other mortgage offerings from the same banks. Specifically the Court highlighted the fact that in the particular case before it, ‘any warnings were drowned in an overwhelming mass of data whereby the attention of the consumer is diverted’.
This specific judgment only literally affects the financial organisations involved. The more general impact of the judgment would seem to be that the inclusion of such clauses in mortgage agreements – as long as they carry the necessary health risks – has now been sanctified by the highest Court in Spain.
Also important was that the Court stated explicitly that the decision was not retroactive, such that any payments made under such a clause would not be returned to the borrower since this would potentially destabilise the economy.
For those with mortgages in Spain therefore, whether or not you are affected will depend on the manner in which any such clause in your mortgage agreement has been drafted. If in doubt you should contact a lawyer to review the mortgage agreement and get an expert opinion as to whether you can have the interest rate on your mortgage reduced.