The floor clause is one that the bank usually includes in the mortgage at the time of its signing and that establishes the minimum interest rate (“floor”) that the client will pay on the capital, although the Euribor or reference index for most of Spanish mortgages are below.
Therefore, a mortgage with that limit continues to pay the stipulated rate even though the Euribor or reference index applicable to interest is below it. That is, it does not allow the debtor to benefit from the drop in that index, however if the Euribor or reference index increases above the minimum interest stipulated in the floor clause, the interest rate that the mortgaged must pay to his financial institution it also increases.
There are numerous people who in their day signed their mortgage without knowing what a floor clause is, and without knowing that their mortgages contained it. These clauses are in principle legal as they are included in the mortgage signed by the client, but they must be previously agreed , since there are judgments that annul these stipulations when there has not been an agreement to establish them and present the circumstances described above: floor (minimum interest) too high and ceiling (maximum interest) also excessively high, which in the end always results in a benefit for the bank and a lack of protection for the client against fluctuations in the benchmark or Euribor.
The Civil Chamber of the Supreme Court has ruled on this matter in JUDGMENT Nº: 241/2013 OF MAY 9, 2013, according to which it annuls them in those cases in which the bank did not clearly and expressly inform the client of its existence in the contract. Therefore, banks may continue to apply it as long as they explain in detail to the mortgaged one of its existence, operation and effects. Not enough, says the sentence, with “ineffective formalities, such as the reading of the contract by the notary.”
The Supreme Court forces to qualify it in a “understandable” and “transparent” way. In any case, these clauses are located in mortgages among an overwhelming amount of data among which are hidden and that dilute the attention of the mortgage underwriter, hence, you should always be well advised before contracting with any bank this type of products.
Currently, there are already sentences of the Spanish courts that meet the criteria of the Supreme Court in the referenced sentence and that condemn the bank to return all the amounts collected and interest derived from said clause from the signing of the mortgage.
