The Supreme Court has ruled that mortgage”floors” are illegal and must be removed from all mortgages, unless they are an integral part of a complex financial package. Millions of people with a mortgage in Spain taken out in the last couple of decades look to see their monthly payments drop substantially!
The idea with mortgage floors is that the amount of interest on your mortgage can never drop below a certain amount.
Lets say you have a standard Euribor tracking mortgage. If the Euribor (European interbank lending rate) goes up, you pay more on the mortgage. And vice versa. But if you have a floor on your mortgage, it doesn´t matter how low Euribor goes, your mortgage rate will never go lower than the floor.
Meaning a lot of people are stuck paying between 2% and 3% at the mo, despite Euribor dropping to about 0,8%. The banks just won´t drop further.
Anyway, after the ruling, Cajamar and BBVA have announced they will implement the ruling at once, dropping the interest rate as from the 1st of June. Other banks, such as Popular, haven´t yet commented; Cajasur, part of Kutxabank, have refused point blank to comply with the ruling, saying it is flawed and they intend to take any legal action they can.
So, let´s see what happens!