We use first and third-party cookies for analytical and statistical purposes and to show you personalised advertisements based on a profile compiled from your browsing habits (e.g. pages visited). For more information, click on our Cookie Policy. You can accept all cookies by pressing 'Accept', you can reject all cookies by pressing 'Reject', or you can customize your choice by pressing 'Manage'.
Mortgages
What is a mortgage floor?
A mortgage floor is a clause that sets a minimum interest rate when the Euribor is low. In variable-rate mortgages, repayments vary depending on the Euribor and the agreed spread. When the sum of these falls below a stipulated threshold, the minimum percentage set in the floor clause is applied.
There are therefore two possible scenarios:
- If the agreed interest rate (Euribor + spread) is below the interest rate floor, the bank may charge the floor interest rate.
- If the agreed interest rate is higher than the floor, you pay the agreed interest rate.
Still don't know which mortgage is best for you? We'll help you decide
CallMe
Just as there is a floor for paying a minimum, there is also a ceiling or maximum interest rate. If the contractual interest rate exceeds the ceiling, you never pay more than that limit.
This is easier to understand with an example:
A customer has a mortgage with a 2% floor clause. In other words, 2% is the minimum rate the customer will pay, regardless of what happens to the Euribor. If the sum of the Euribor and the spread is 1%, the customer will still pay 2%, because that is the agreed minimum percentage.
If the sum of the Euribor and the spread is 3%, this clause would not apply and the customer would pay the contractual interest rate of 3%.
This clause started to be applied by some entities in Spain when the Euribor fell considerably. You need to review the deed for a mortgage loan to find out whether the mortgage has a floor clause, specifically whether it establishes that the interest rate cannot be less than a certain percentage.
The use of floor clauses in sales contracts is not permitted at present.