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European Court ruling opens door to mortgage overpayment challenges for 10,000 borrowers

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  • 09/01/2017
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European Court ruling opens door to mortgage overpayment challenges for 10,000 borrowers
The European Court of Justice has overturned a Spanish supreme court ruling barring mortgage borrowers on Spanish properties from mounting a legal challenge over variable rate mortgage over payments.

In Spain, borrowers have signed two to four million mortgage contracts with mortgage floors, which meant no matter how far the Euribor (the rate most used to calculate mortgage payments in Spain) fell, borrowers continued to pay interest at a fixed minimum amount, despite having a variable rate mortgage.

Legal experts estimate the 21 December ruling opens the door for over 10,000 borrowers willing to challenge mortgage lenders where as much as £4bn could be available for average pay outs of  15,000 euros.

Back in May 2013 the Spanish Supreme Court ruled that any floor clauses that had not be adequately explained to borrowers were “abusive”, and therefore null and void, entitling borrowers to a refund for overpayment, but only going back as far as May 2013.

The time-limit was contested by consumer groups at the European level, arguing that it was inadmissible under EU law, but on Wednesday 21st December the ECJ threw out those arguments, paving the way for reclaims with total retroactivity and no time-limit.

Spanish property expert Mark Stucklin from Spanishpropertyindisght.co.uk, is the contact for those wishing to join a class action claim. He said: “Floor clauses are not illegal in themselves. The problem was that, in many cases, they were not adequately explained, and that clauses in contracts were not “transparent” or “understandable”. This means you are not entitled to automatic reimbursement just because you have floor clauses in your mortgage agreement. You have to go to court to argue the clause was not adequately explained to get it ruled null and void.”

The Court of Justice of the European Union, established in 1952, is tasked with interpreting EU law and ensuring its equal application across all EU member states.

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