The Government and banks agree to alleviate mortgages for rents of up to 29,400 euros

The Council of Ministers this Tuesday will present a package of measures to alleviate the effect of the Euribor increases on vulnerable consumers and the middle classes.

Thomas Osborne
Thomas Osborne
21 November 2022 Monday 23:37
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The Government and banks agree to alleviate mortgages for rents of up to 29,400 euros

The Council of Ministers this Tuesday will present a package of measures to alleviate the effect of the Euribor increases on vulnerable consumers and the middle classes. The new measures, the Government assures, will protect more than a million households, by including an income cap of 29,400 euros, or three and a half times the Iprem.

The aid appears collected in a royal decree-law for its entry into force on January 1. They are the result of an agreement with the banks, although the Government warns that it is yet to close the last details with the bank employers.

There will be an extension of the 2012 Code of Good Practices for vulnerable consumers, voluntary registration by banks and mandatory compliance, as well as a new code for measured classes, which will have their quota frozen and extended to 7 years the repayment term of the credit if they demonstrate difficulties and have signed the mortgage before December 2022.

This middle-class profile will be able to benefit from the aid if they start to bear a mortgage burden of more than 30% of their income and if the cost of the debt rises by at least 20%. The Government assures that the measures can be applied without damaging the financial stability of the banks.

The measures are completed with the elimination during 2023 of the commissions for early repayment and for the conversion of the credit from variable to fixed rate. In this way, consumers will have an easier time signing up for a fixed-rate mortgage and weathering market volatility.

The Government has negotiated the measures with the banking employers' associations AEB, CECA and UNACC, and has held talks with the Bank of Spain to implement them. According to what he says, there are 3.7 million mortgages referenced to the Euribor. Three out of four are currently granted at a fixed rate and the average residual term has dropped to 10 years in 2021. In addition, the percentage of households that spend more than 40% of their disposable income on mortgage payments has dropped substantially in the last years.

With regard to the vulnerable, the Code of Good Practices will incorporate the possibility of restructuring the mortgage loan with a lower interest rate for five years, in which there will also be a grace period in which they will be exempted from paying the principal . At that time, the Euribor minus 0.1% will be applied, compared to the current Euribor plus 0.25%. The term to request the dation in payment of the house is also extended to 2 years and the possibility of a second restructuring is contemplated.

In addition, households with an income of less than 25,200 euros a year (three times the Iprem) who dedicate more than 50% of their monthly income to paying the mortgage are allowed to benefit from the code and enjoy a grace period of two years. It will not be necessary to demonstrate that they dedicate more than 50% of the income to the mortgage. They will have a lower interest rate and an extension of seven years.

The Government and the banks have rushed the negotiations to the maximum to establish a mechanism that alleviates the rises in the Euribor. Differences have arisen in the scope of the measures and, specifically, in their extension to more households. The Ministry of Economic Affairs has wanted to expand the universe of beneficiaries as much as possible and the banks have shown reluctance. Minister Nadia Calviño said last week that the goal is to reach the middle class.

The agreement on mortgages between the Government and the banks, represented by the AEB and the former CECA savings banks, would be the third of this legislature, but the most important. The other two refer to the inclusion of the elderly and rural areas. Now what was at stake is a preventive solution to a problem that flies over domestic economies, that of rising mortgage prices. As a fundamental obstacle is the new tax on banks, which, unlike that of energy companies, has not been softened in the parliamentary process and which will foreseeably be approved this Thursday in Congress.

INE statistics place it in the middle class, in terms of family income, at around 30,000 euros. Its latest available data, from 2019, also establish the average salary at 21,682 and the median at 17,961 euros, which is the one found in the center of the sample, with the same number of people above as below. The results vary greatly by region.