The government of Spain adopts a package of measures to ease the financial situation of vulnerable households or households made vulnerable by the rise in interest rates. The goal, the Executive says, is that the package of measures will be available from 1 January next.
The Council of Ministers of the Government of Spain approves a package this Tuesday measures What will allow alleviate the financial situation of vulnerable families or families at risk of becoming vulnerable in the Spanish state due to the rise in interest rates. As reported by the Spanish government, the aim of the package of measures is to ease the mortgage burden more than a million homes while maintaining financial stability from next January 1, 2023.
In this context, as reported by the Government of Spain, the expansion of the catalog of measures that households can access will, on the one hand, enable them “to have more options to effectively reduce their mortgage burden”, and moreover “to have more security their level of expenditure in the medium and long term, in order to choose the measure best suited to their needs and financial situation”.
The executive headed by Pedro Sánchez indicates that there are currently in the Spanish state 3.7 million mortgages linked to Euribor: “Thanks to the income protection measures and the decline in the credit stock,” says the source, “households are in a healthier financial position, with more savings and less debt than before. We should add that three out of four mortgages are currently at a fixed interest are provided, that the average remaining term has fallen to 10 years in 2021 and that the percentage of households that spend more than 40% of their disposable income on paying the mortgage has fallen sharply in recent years, he makes clear.
The approved measures have an effect in this line Three way: first, “improving the treatment of vulnerable families“; second, “opening a new temporary action framework for households at risk of becoming vulnerable due to the rise in interest rates“; and, third, “take improvements to facilitate the early redemption of loans and the conversion of fixed-rate mortgages“.
Improvements to the Code of Good Practices approved in 2012
In this way, the government of Spain explains that the measures include improvements to the code of good practice for vulnerable mortgage debtors, which has been adopted since 2012, “to adapt it to the current situation”; vulnerable debtors “will have the option to restructure the mortgage loan with a lower interest rate during the five-year grace period (Euribor – 0.1%, compared to the current Euribor + 0.25%)”. Similarly, the deadline for requesting the payment of the house is extended to two years and the possibility of a second restructuring is considered, if necessary.
In addition, “with the aim of expanding the reach of the action”, households with an income of less than 25,200 euros per year (three times the IPREM, the public indicator of multi-effect income, an index used in the Spanish state used as a reference for granting aid, grants or unemployment benefits) “those who spend more than 50% of their monthly income on paying the mortgage but do not meet the current criteria of a 50% increase in mortgage payments may benefit of the Code with a grace period of two years, a lower interest rate during the grace period and an extension of the term to seven years”. The Spanish government points out that it is a measure “necessary for those families who, due to the rise in interest rates, reach excessive mortgage outlays that force them to reduce their basic expenses and endanger the payment of the mortgage”; These homes can thus receive an adequate treatment.
The government of Spain explains that with these measures, a family with a standard mortgage of 120,000 euros and a monthly payment of 524 euros after the interest rate review will see “their repayments during the five-year grace period fall by more than 50%, to 246 euros”.
New Code of Good Practice
In addition, the set of measures proposes a new Code of Good Practice, “to alleviate Middle-class debtors threaten to become vulnerable due to the rise in mortgage payments“, making it easier for households to adapt more gradually to the new interest rate environment. These are measures that households “with an income of less than three and a half times the IPREM, 29,400 euros per year, with mortgages taken out until December 31, 2022, with a mortgage payment of more than 30% of your income and that has increased by at least 20%: “For all these cases, financial institutions must offer the option of freezing the term for twelve months, a lower interest rate on the deferred principal and an extension of the term of the loan up to seven years”, specifies the government of Spain.
At the same time, according to the same source, “costs and fees will be further reduced to facilitate the transition from a floating rate to a fixed rate, and fees for prepayment and switching mortgages from a floating rate to a fixed rate will be eliminated throughout 2023 .” permanent”. Measures will be included to promote financial education and supervision of the application of both codes will be strengthened.
The two codes of conduct will be voluntarily adhered to by financial institutions and will become mandatory once signed. Banking entities must guarantee the protection of this catalog of measures in case of transfer of the credit to a third party.
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Source: EITB
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
