Nationalized lender Novagalicia has joined BBVA and Cajamar in announcing that it is stripping so-called interest-rate floor clauses from outstanding mortgage contracts, effective as of May 9, the day on which the Supreme Court ruled such conditions to be null and void.
Floor clauses limit the extent to which borrowers can benefit from falls in the benchmark used to set variable-interest mortgages, which in the case of Spain is habitually the one-year Euribor rate.
The Supreme Court determined that within the context of a mortgage contract as a whole such causes included in the fine print of documents lacked the transparency required by the law.
Novagalicia’s decision affects 90,000 contracts and mortgage debt totaling 6.6 billion euros. The bank said it has ceased to issue home loan contracts since the start of 2011.In a statement to the National Securities Commission (CNMV), Novagalicia said if interest rates remain at their current level, the impact of the removal of floor clauses on its earnings would be 48 million euros, the equivalent of 6.7 percent of its net interest income last year.
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