We all know how difficult it can be to work your way through small print. Who actually does? Often written in legal terms, and as the name suggests, in very small letters, it is unintelligible to the majority of us. So, no wonder it caught some people out when they agreed their mortgages in Spain.
The clause was hidden within the agreed loan variable rate and was very difficult for the contracting customers to pick up on. We all know that we should read the small print but the majority of us rely upon being informed of any major conditions that we should be aware of. Unfortunately not everyone was.
The clause states that even though the rate of the mortgage might be linked to the Euribor there is a limit on how far the rate might fall. In other words, preventing mortgage holders from benefiting from a really low Euribor.
What makes it worse is that this capping of a limit at the bottom end is not matched at the top end. There is no accompanying clause ceiling so, if the Euribor should suddenly climb steeply, those same clients who were prevented from gaining the benefit at the lower end are not protected from a high Euribor. Where there is a clause ceiling, it tends to be so high (8%, 9% or even as high as 20%) that it is never likely to be reached.
What’s particularly disturbing is that the banks were well aware of all this when they set up these mortgages. They knew at the point of sale that they were not in the best interests of the clients they were selling them to.
What can you do? Although there has been some discussion about this in Parliament it has not resulted in any legislation. However, the amount that might be lost over a period of years is quite substantial and it is worth mortgage holders considering taking legal action against their Spanish bank in order to change their mortgage and shake this expensive clause from their contract.