What are the government measures, who can benefit and when do they come into effect

Green light for a package of measures to mitigate the impact of the rise in Euribor on mortgages. After months of discussion, the employers’ associations (CECA, AEB and UNACC), the Bank of Spain and the Ministry of the Economy have reached an agreement in principle with the measures that, according to the executive, will affect 1 million mortgages and were approved in the Council of Ministers this Tuesday. However, in the financial sector, they still point out that there are details that need to be analyzed and evaluated in order to give a final ‘OK’.

As Deputy Chief Economic Officer Nadia Calvino explained after the cabinet, the bank will have a month to decide whether to abide by this agreement because the measures will in principle come into force from January 1, 2023. This, in practice, would leave four months without protection for mortgages, since Euribor started to rise strongly in September, as reported by ABC.

How will the new assistance be explained? The instrument chosen by the executive and the banks are new codes of good practice, and adherence to it will be voluntary by the entities, although their compliance will be mandatory once they join it, as well as when transferring credit to a third party. The executive branch also aspires to strengthen oversight of compliance with both laws.

With regard to beneficiaries, measures will be taken in three directions: Improving treatment for vulnerable families With the new “Temporary Framework for Vulnerable Families” and the adoption of amendments to Facilitate early repayment From the credits and Converting mortgages From a variable rate to a fixed rate.

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As Deputy Chief Economic Officer Nadia Calvino explained after the cabinet, the government calculates that a third of those mortgaged at a variable rate, that is, nearly a million homes.

vulnerable families

A major novelty is an amendment to the Good Practices for At-Risk Mortgage Debtors Act, which has already been in place since 2012, to create a new code. According to this document, the mortgaged person is considered vulnerable when he has an income of up to three times the IPREM (25,200 euros), and he has a financial effort rate (The percentage of income that goes to paying the mortgage) by 50%, moreover, we have witnessed how this rate has increased by 50% in recent years.

With the changes agreed between the banks and the government, those mortgages will be given a choice Restructure your loan at a lower interest rate During the principal grace period – which means that at least part of the mortgage payment has not been made – for 5 years. Specifically, from Euribor +0.25% it will go to Euribor -0.1%. also, The home delinquency application period has been extended to two years (Handing over the house to the bank in exchange for canceling the debt) and opening the door for a second restructuring for these mortgagees.

lower requirements

Similarly, the set of actions will make the requirements for accessing the Code of Good Practice more flexible. Thus, mortgagors who meet the income and financial effort requirements can join it even if they do not meet the third condition, which is that the financial effort has grown by 50%.

For them, the agreement provides a grace period of 2 years with a lower interest rate during this period and an extension of up to 7 years. This measure is intended for Families affected by higher interest rates And that they are forced to cut back on essential expenses so they can make their mortgage payments, putting the letter’s payment at risk.

For example, the executive determines that a family with a mortgage of €120,000 and a monthly payment of €524 FifthThe monthly payment will be reduced During a five-year grace period of more than 50% up to €246.

Adapting to a mortgage

Directed to Families with an income of less than 29,400 euros per year, that is, three and a half times IPREM, whose mortgages are underwritten until December 31, 2022. They are families who, in addition, must have a mortgage burden of more than 30% of their income and which have risen, at least 20%. For them, it will be served The possibility of freezing fees for a period of 12 monthsfor youn low interest rate s Extending the loan period up to 7 years.

All of this aid will be framed by a new code of good practice aimed exclusively at middle-class mortgages.

Changing a mortgage from a variable rate to a fixed rate

In order to facilitate this modification, Fees and commissions will be further reduced for these groups of mortgagees. In addition to canceling early repayment commissions and changing the mortgage from variable to fixed throughout the year. According to the real estate advisory firm Tecnotramit, the cost of changing from a variable mortgage to a fixed one can range between 500 and 1000 euros.

One of the points where banks and the government clashed most was aiding this group. The entities wanted to limit incentives for the vulnerable, while the executive wanted to widen the crossroads and also allocate aid to the middle class.

What entities will join the actions?

The number of entities that will support these measures, which are voluntary but mandatory, remains unclear. As confirmed by Vice President Economics Nadia Calvino, after cabinet, entities will have a month to decide whether to join the new codes of good practice. In addition, he noted that CaixaBank has already confirmed that it will join the new measures.

The CEO of Santander, José Antonio Alvarez, has already stated that some initiatives will have an impact on the provisions offered by the sector, already when there is some extension or extension of credit «foreverMoving on to judgments.

However, after his speech at the 29th financial sector meeting organized by ABC and Deloitte, he noted that “small changes” could still occur in the agreement, given that depending on how the refinancing is implemented at the time of the extension “may or may not affect The number of provisions, and not only there, but also in the consumption of capital in the mortgage business.

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