The zero clause is a mortgage contractual clause according to which the bank guarantees that the interest charged has a minimum of 0%. In this way, even with negative reference interests, the total interest charged will not be below this value .
In a simple way, what the bank does is to shield itself before the drop in the reference interest rates, usually the Euribor . Therefore, it affects mortgages with variable rates. Thus, if this interest takes negative values, the bank ensures a minimum return. Thus, if the rates are negative and we have a zero clause, the bank ensures that the interest is not less than 0%, since in this case, the entity should pay to lend money.
The legal problems of clause zero
It all started with the ground clause that prevented mortgage interests from being below a certain value. The lack of transparency in the contracts, together with the economic crisis, led many users to sue their entity. The judges began to publish sentences in which this clause was declared illegal and that was the beginning of massive lawsuits. Everything ended up being corroborated by the Supreme Court, which established jurisprudence.
In clause zero the matter is somewhat more confusing. There are experts who believe that in this case there is no clear abuse. In fact, they consider that it may seem more like a fair claim of the bank to secure income from the provision of a service. In short, it is an option that, provided it is voluntary, will depend on the parties. Of course, transparency, although it is greater than in the others, has to occur.
Example of floor clause
It is very similar to the ground clause. It consists of establishing a limit for leaving which will not lower the interest rates of the mortgage. Perhaps with an example it looks clearer. Imagine a fictitious situation in which the Euribor goes down to -1.5%. This situation is more than improbable, but it serves as an example.
Our bank charges us a differential of 1% on that euribor. In this way, by adding both, we have a total interest of -0.5%. The bank should pay us. It may seem good news, but in this situation what would happen is that no one would be willing to lend money. This zero clause guarantees the bank that at a minimum, the interest rate will be 0% and we would only pay the loan capital.