Monday, November 21, 2022

Spain to approve mortgage support for more than 1 million households

Jesús Aguado
Mon, 21 November 2022

Young people walk past an estate agent in Guernica


By Jesús Aguado

MADRID (Reuters) -The Spanish government will approve on Tuesday mortgage relief measures such as extending loan repayments for up to seven years for more than one million vulnerable households and middle-class families, the economy ministry said on Monday.

The ministry said the new measures, which would be given the go-ahead at the government's cabinet meeting, would be adopted pending final negotiations with Spanish banking associations.

In Spain, around three-quarters of the population are homeowners, with most opting for floating-rate mortgages, more exposed to accelerated interest rate rises.

Under the framework, banks will provide mortgage support for vulnerable families through an amended industry-wide code of good practice. The income threshold has been set at 25,200 euros ($25,815).

Vulnerable households will be able to restructure mortgages at a lower interest rate during a five-year grace period, already set in the original 2012 industry-wide code of good practice, which is voluntary but becomes mandatory once lenders adhere to it.


Grace periods allow borrowers to delay payments on the principal of the loan without being charged late fees and not resulting in default or loan cancellation.

The period for cancelling debt has been extended by two years and includes the possibility of a second restructuring, if necessary, the ministry said.


Vulnerable families that spend more than 50% of their monthly income to repay their mortgage, but do not meet the condition set out in the previous code of a 50% rise in their mortgage payments, can take advantage of a two-year grace period.

The government will additionally implement a new code of good practice for middle-class families at risk of vulnerability, setting the income threshold at less than 29,400 euros.

In those cases, lenders must offer the possibility of a 12-month freeze on repayments, a lower interest rate on the deferred principal and an extension of the loan if a mortgage burden represents more than 30% of their income and the cost has risen by at least 20%.

The mortgage relief is expected to come into effect next year.

($1 = 0.9762 euros)

(Reporting by Jesús Aguado; Editing by Emma Pinedo, Sam Holmes and Muralikumar Anantharaman)

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