eurossMILLIONS of mortgage holders could be in for a massive payout.

The controversial floor clause – AKA clausula suelo – has been deemed null and void by a Madrid judge.

And while banks are preparing to appeal the decision, it comes as huge relief to homeowners across the country.

Estimated to be responsible for a whopping 90% of Spanish housing evictions, the minimum-rate interest clause has been costing mortgage holders an average of €3,000 a year for far too long.

The clausula suelo saga has long been an embarrassing blot on Spain’s mortgage system. This ruling once and for all puts an end to it and the market can now move on with its integrity somewhat restored.

With around 10% of Spanish mortgage holders affected by the hidden interest fee, most banks had already removed the clauses from recent contracts.

The latest ruling comes after the European Commission ordered banks to reimburse customers in full, last year.

And now a Madrid judge has backed up the European Commission’s ruling, paving the way for 2.5 million people to claim compensation payouts from the banks.

While nothing is likely to be paid out immediately – until the banks appeals are (hopefully) thrown out – analysts expect a whopping payout of around €1 billion.

The logistics of the payback are yet to be ironed out, although I would urge mortgage holders to contact their banks directly for more information.

To give a little background, the clausula suelo saga reared its head in the mid 2000s, with thousands of customers complaining that they were being tricked into paying thousands of euros on top of their mortgage repayments.

In actual fact it only became an issue because Euribor base rates dropped so low, way below the minimum rate imposed by the clausula suelo, leaving clients overpaying by up to 3%.

By May 2013, the Supreme Court ruled that the fee had not been outlined efficiently in mortgage contracts. Banks were ordered to remove clausula suelo from all contracts where they were not outlined clearly and to repay any fees paid from that date on.

But the European Commision and now the Madrid courts have ruled that those sanctions do not go far enough as the banks had an obligation to pass on the drop in the base rate. They have ordered banks to dip into their coffers and reimburse mortgage borrowers in full from the date they started repaying.

All in all, it will cost the banks a fair amount but will go some way to restoring confidence in the mortgage system.

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