S mortgages They have become a very heavy slab for families due to the increase in the Euribor. The index to which variable rate mortgages refer has gone from being at negative rates to getting closer and closer to 3%. The consequence is an average increase of around 200 euros in monthly payments, which is added to the general increase in the products in the cart.
According to a study by Idealista, the mortgage payment represents on average 23.5% of family income in Spain, but in some areas it represents much more: in Barcelona amounts to 49.7%, in San Sebastian at 46.8% and within Madrid at 41.3%.
These figures, the fact that the Euribor is going up and the added complications of the general price increase in other areas are what have led the government and the banks to negotiate what measures can be put in place, something they surely do not understand who he had one fixed rate mortgage.
Government and banks are talking about different possibilities. Among these are aid for the weakest, alternatives for citizens with medium or low incomes and ideas to facilitate the transition from variable to fixed mortgages.
As is known, the transition from a variable to a fixed mortgage can take place in the entity itself (novation), transferring it to another (subrogation) or with a new mortgage. The main obstacle in the event of a novation is that the new offer has stiffened. It remains to be seen whether the government and the banks agree on a maximum rate to help the families most affected by the rise in the Euribor which makes this option more attractive than subrogation or the transfer of the mortgage to another bank.
Entity switching is usually more expensive. The mortgage law established that the new bank is responsible for paying the notary – between 0.2 and 0.5% of the outstanding amount of the subrogated loan – in addition to registry and agency fees. Unless the State and the bank agree on a waiver, the customer will have to bear the estimate of the mortgaged property and, possibly more onerous, the subrogation fee which, if included in your mortgage, the bank you are borrowing from loan will want to charge you. This may be the most important invoice. Its cost has been regulated by law since June 2019. When it comes to an adjustable rate mortgage taken out from then on, this cost will be 0.25% for the first three years or 0.15% for the first five years .
As for the aid to most vulnerable, the reference to be able to benefit from it is the Code of Good Practices approved in the previous crisis, adapted to the current situation. Those who voluntarily undertake it are obliged to restructure the client’s debt (extend the deadline to reduce the installment or reduce the interest for a period of time, among other matters) or analyze whether they make write-offs or assignments if the repayment is not guaranteed .
The possibility of taking refuge is not open to any citizen. The original Code already establishes a maximum family income that does not exceed three times iprem (Public Income Index for Multiple Effects, the benchmark for subsidies, aid, etc.). Taking into account that the annual Iprem today stands at 8,106.28 euros in fourteen payments, the limit would be multiplied by three: 24,318.84 euros. While waiting for this limit to be maintained or not, it is being discussed whether the beneficiaries will be able to opt for this aid with a lower financial burden. Until now the Code required that the financial burden exceed 50% of the household income, now the limit could be lowered to 40%.
Whether or not the Code will be reformed remains to be seen. The bank supports temporary addition to the original code. They stress that the situation should improve when inflation is reversed and that a temporary measure would avoid damaging the culture of payment.
In the case of low and medium incomes with a mortgage, solutions are being studied, such as banks that freeze the quotes for one year, allowing the duration of mortgages to be extended if they become more expensive by more than 30% and if they consume at least 40% of the family income, or facilitate the transition to fixed-rate mortgages. By extending the loan term, the financial burden is immediately reduced. The measure would apply to variable rate mortgages entered into starting from 2012 for first homes.
New borrowers are among those who will suffer the most. The industry talks that around 25% of those with adjustable rate mortgages will be the hardest hit due to the intensity of the Euribor hike in recent times. While the government and the bank are studying whether to help the mortgage, the majority are already opting for the fixed rate. In July, according to the most recent data, this type of mortgage exceeded 75% of signatures, a figure that had not been seen until now.
Some wonder how this set of measures will affect banks. Calvin Yesterday he replied that “the billions of euros in benefits” that the banking sector recently announced should make him understand that “we need to lend a hand and help” the most affected families. It’s a good way to make it clear that the Government will do nothing on its part, but will look favorably on the votes it receives thanks to this initiative.
