Latest news on the mortgage ground clause or “clausula suelo”

It appears there is light at the end of the tunnel for the thousands of mortgage holders with a ground clause.

This clause basically sets out minimum and maximum levels of interest payments. A typical clause might state a 4% minimum payment and a 15% maximum.

Various court cases, including recent judgements in Sevilla and Mallorca, consider this clause illegal.  the key seems not to be its existence, but the be the disproportionate distance between the ground and ceiling levels.

At present most standard mortgage rates are calculated using Euribor average over 12 months plus a percentage of perhaps 0.75% or 1%.

The Eurobor is at about 0.60% so if the bank charges 1% on top of that, the rate is 1.6%.

With interest levels at such a low level, the interest payments differential might be 2.4% in this case. Over a 30-year mortgage, that might make a difference of about 250€ per month. Quite a significant difference.

if you are affected by this clause and for more information on these judgments you should contact you local citizen advice office. You can also try the  association of bank and building society users ADICAE

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