The Council of Ministers this week adopted a package of measures aimed at those affected by the rapid increase in the Euribor. On the one hand, it improves the treatment of vulnerable families, who already enjoyed protection after the financial crisis. So, for annual rents below €25,200 and with a mortgage burden exceeding 50% of the monthly rent, two scenarios are considered: if the mortgage burden has increased by more than 50%, they can apply for a grace period of 5 years, with a Euribor interest rate of -0.10%. They will also have 2 years to request the replacement dating and it is possible for them to request a second renovation. If the mortgage effort has grown less than 50%, the grace period will be 2 years, with a lower rate, or an extension of the term up to 7 years.
Instead, it protects families at risk of vulnerability, with incomes below 29,400, who spend more than 30% of their monthly income to pay the mortgage and have recorded a 20% increase in the mortgage effort: they can freeze the rent for 12 months and extend the term up to 10 years. Furthermore, for all mortgages, the early repayment commission and commissions deriving from the conversion of the fixed-rate mortgage will be eliminated during 2023 (permanent reductions are also envisaged for this). Finally, it incorporates as a new obligation to ensure the protection of debtors’ rights before the assignment of mortgage loans to third parties.
Of these measures, the first surprising thing is that the debtor, who took a risk with the variable rate, now doesn’t assume the consequences after so many years enjoying very low rates. The aid is a clear injustice for those who have prudently opted for the fixed rate. In any case, families will need to analyze these measures carefully. Shortages do not stop being a “kick forward” as the volume of global interests grows.
However, it is understood that vulnerable families must be protected, those who really are, even if in this case the help should come from the State, and the contractual relations between the parties must be maintained according to their terms. The image of being at the side of the needy is good for the Government, which must also prevent mortgage defaults from skyrocketing. But he bears the cost to the bank. Public deposit insurance, the substantial aid received during the crisis, the ECB’s preferred financing, the public guarantee on loans during the pandemic… all allow them to force the banks to accept.
The banks, well aware of the privileges they enjoy, have expressed their willingness to join. Mortgage defaults are also not good for them, nor do they want to go back in recovering a good reputation, which has been badly damaged since the crisis. Furthermore, they ensured that the beneficiaries of these measures are not included in the defaulters, which exempts them from adopting the provisions of the established law. And they will know how to defend themselves socialize these losses, that is, they will look for a way to pass on the cost of these measures to all users of the bank.
