HEALTHPLAN MAGAZINE

The Spanish government and banking associations, the CECA and the AEB, are close to agreeing a plan to help reduce the impact of the sharp increase of mortgage prices that have followed the growth in interest rates, set by the European Central Bank (ECB).

With rises in utility and food bills due to soaring inflation, an agreement on help with mortgage repayments for homeowners will be very welcome.

According to banking sources who are knowledgeable as to how the talks are going, an agreement is very close. The plan that has the most backing, is one that would see mortgage payments temporarily frozen for the most vulnerable. It would also include an extension of the amortisation period to facilitate payments.

CaixaBank was the first to put forward this proposal. They recently suggested not increasing the fees with the rise in Euribor, so in effect freezing the fees of those most vulnerable, for 12 months.

Other ideas have been submitted, such as applying a moratorium on loan payments, something that was done in the depths of the Covid pandemic. Then, the Spanish government offered households who were affected financially, a 3-month deferral of their mortgage payments. This was later extended to nine months, with no interest added.

Other formulas were put forward but have since been ruled out due to the restraint of Brussels, where the requirements are that any measure that is adopted should be in accordance with European directives.

Along with CaixaBank, CECA has been the main promoter of the negotiations, with Ibercaja, Kutxabank, and Unicaja also giving their approval.

The AEB, which includes Santander, BBVA, and Banco Sabadell, is a little more reluctant to give a green light to the idea. This is because it has fewer vulnerable customers on its mortgage list.

However, the above-mentioned source, believes that a joint agreement will take place.
The main hurdle now is to define what a vulnerable customer actually is.

According to Spain's code of mortgage practices which was agreed to by the Government and the banking industry in 2012, the threshold would be 24,319 euros which is the equivalent of three times the IPREM. However, other conditions would be that the household's effort to meet the monthly payment had increased substantially and that their mortgage repayment was more than 50% of their total income.

For now, credit institutions believe that non-performing loans remain at reasonable levels. The proportion of doubtful loans, with respect to the total, is 3.9%, a far cry from the 14 percent figures that were registered in the worst of the great recession.

The low levels of non-performing loans mean that banks do not expect their balance sheets to show large imbalances if an agreement is reached.

For weeks now the Ministry of Economic Affairs, led by the first vice president of the Government, Nadia Calviño (pictured), has been busy negotiating terms with the banks. And on Friday, she defended the need to reach a broad pact "that covers the entire banking sector" in order to reach the largest possible number in the market.

The vice-president stressed the need to guarantee that banking institutions facilitate changes from a variable rate mortgage, to a fixed rate and highlighted that the work being done with the banks is to "cushion and minimise the impact of the Euribor."

“Intensive work is being done and I am confident that in the coming weeks we can have this framework and a range of measures that can alleviate the situation for families and that eliminate any possible risk of impact from the point of view of financial stability," said Calviño.

Sources

https://www.20minutos.es/noticia/5072463/0/gobierno-y-banca-acercan-posturas-para-congelar-hipotecas-a-los-mas-vulnerables/

Image Credit: La Moncloa - Flickr