The Supreme Court has ruled out late-payment interest on mortgages exceeding 2%

On June 3, 2016, the plenary session of the First Chamber of the Court resolved to declare null and void, due to its abusive nature, a clause included in a mortgage loan from BBVA signed with a consumer that set the default interest at 19%.

The ruling establishes the nullity of any default interest (which is the interest paid by the client when payment deadlines have passed) that exceeds the compensatory interest rate (the interest rate in effect when payments are up to date) by more than two percentage points. Thus, the judge sets the threshold for abusiveness at two percentage points above the agreed compensatory interest rate. For this reason, the judge declares the clause that sets the default interest rate for the mortgage loan in section 19% to be abusive.

The ruling also points out that we are dealing with a pre-drafted clause that has not been individually negotiated and is therefore subject to content control for unfairness.

The consequences of the ruling are important because, although it does not eliminate the default interest, it does limit its amount to two points above the compensatory interest agreed upon in the contract.

In this way, the same criterion established in the judgment of April 22, 2015 for default interest in personal loans is extended to default interest agreed in mortgage loans, so that the limit of abusiveness is set at two points above the agreed remunerative interest.

This ruling is important because of the implications it may have on future mortgage loan agreements signed with banking entities, as well as on the numerous mortgage foreclosure proceedings that are underway, leading to greater protection for mortgage debtors.