Business The Government and banks agree on measures to help more than a...

The Government and banks agree on measures to help more than a million mortgagees

Archive – The First Vice President and Minister of Economic Affairs and Digital Transformation, Nadia Calvino, offers a press conference after a meeting with financial associations at the headquarters of the Ministry of Economic Affairs and Digital Transformation – A. Perez Meca – Europa Press – Archive

MADRID, Nov. 21 (EUROPA PRESS) –

The Government and the banking sector have reached an agreement on the measures they will adopt to alleviate the mortgage burden of more than a million vulnerable families or at risk of vulnerability due to the rise in the Euribor, preserving financial stability, as reported by the Ministry of Economic Affairs and Digital Transformation.

The negotiation that the Government maintains with the bank employers’ associations (AEB, CECA and UNACC) and with the Bank of Spain continues open, in the absence of closing the last details, but it is expected that the Council of Ministers will approve this Tuesday the expansion of the catalog of measures that households will be able to access to effectively reduce their mortgage burden and have more certainty in their level of spending in the medium and long term, being able to choose the measure that best suits their needs and financial situation.

Specifically, the package of measures will act in three ways: improving the treatment of vulnerable families, opening a new framework of temporary action for families at risk of vulnerability due to the rise in rates and adopting improvements to facilitate early repayment of loans and conversion of fixed-rate mortgages.

For vulnerable mortgage debtors (with incomes of less than 25,200 euros per year, three times the IPREM), the Code of Good Practices approved in 2012 will be expanded and strengthened, so that they can restructure the mortgage loan with a reduction in the interest rate during the grace period of 5 years (up to Euribor -0.10%, from the current Euribor +0.25). Likewise, the term to request the dation in payment of the house will be extended to 2 years and the possibility of a second restructuring is contemplated, if necessary.

Households with an income of less than 25,200 euros per year that dedicate more than 50% of their monthly income to paying the mortgage but that do not meet the current criteria of a 50% increase in the mortgage effort may benefit from the Code with a grace period of 2 years, a lower interest rate during the grace period and an extension of the term of up to 7 years.

“This measure is necessary for those families that, as a consequence of the rise in interest rates, reach excessive levels of mortgage effort that force them to reduce basic expenses and jeopardize the mortgage payment, can receive treatment adequate”, explained Economia in a statement.

By way of example, the Ministry has indicated that the application of these measures will allow a family with a mortgage of 120,000 euros and a monthly payment of 524 euros after the interest rate review to see their payment reduced during the grace period 5 years in more than 50%, up to 246 euros.

On the other hand, a new Good Governance Code is proposed to provide relief to middle-class debtors at risk of vulnerability due to the increase in the mortgage payment, facilitating a more gradual adaptation for families to the new interest rate environment.

Households with an income of less than 29,400 euros per year (three and a half times the IPREM) and mortgages subscribed until December 31, 2022 that have a mortgage burden of more than 30% of their income and that has risen, to the less, 20%.

Financial institutions must offer all these cases the possibility of freezing the installment for 12 months, a lower interest rate on the deferred principal and an extension of the loan term of up to 7 years.

Likewise, Economy has communicated that expenses and commissions will be further reduced to facilitate the change from variable to fixed rate, so that commissions for early repayment and mortgage change in the aforementioned sense will be eliminated throughout 2023.

Measures for the promotion of financial education will also be included and monitoring of the application of both codes will be strengthened.

The two Codes of Good Practices will be voluntarily adhered to by financial institutions, which will be obliged to comply with them once signed. In the event of transfer of credit to a third party, banking entities must guarantee the protection of this catalog of measures in case of transfer of credit to a third party.

Financial institutions will be able to adhere to the Codes immediately and the objective is for the set of measures adopted to be available as of January 1, 2023.

There are currently 3.7 million mortgages referenced to the Euribor. “Thanks to the income protection measures and the drop in the credit stock, households have a healthier financial position with more savings and less indebtedness than in the past. To this we must add that three out of four mortgages are currently granted at a fixed rate, the average residual term has dropped to 10 years in 2021 and the percentage of households that dedicate more than 40% of their disposable income to paying the mortgage has decreased substantially in recent years”, highlighted the Ministry .

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