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This week, the government and the banking sector have finally reached an agreement following a series of meetings since September this year.
The new measures will help more than 700,000 families with their mortgage payments following the recent rises in the Euribor.
Would you like to know how this government support scheme for mortgage payments works?
Would you like to know how this government support for mortgage payments works?
It will be provided through a mechanism added to the existing Code of Good Practice (in force since 2013), which is applied voluntarily by the banking sector, although compliance with this code is overseen by a supervisory committee.
This means that when you apply at your branch to benefit from this support, it will be the bank that has the final say on whether or not to grant it to you.
What are the eligibility criteria?
These are the requirements for applying for government assistance to pay your mortgage
- Your household’s annual income must not exceed 29,400 euros.
- Your mortgage payment must exceed 30 per cent of your household income.
- Your mortgage payment must have increased by 20 per cent in recent months.
- The mortgage must be on your main residence (not a second home).
What does the assistance involve?
- A mortgage payment freeze for up to one year.
- Extending the mortgage repayment term by up to 7 years.
- A reduction in the interest rate on the deferred principal.
- The bank fee for repaying the entire debt or switching your mortgage from a variable-rate to a fixed-rate mortgage during 2023 has been waived.
How many mortgages are there in Spain?
In August 2022 alone, 37,000 residential mortgages were granted, of which 70 per cent were fixed-rate and 30 per cent were variable-rate.
According to the newspaper El País, there are currently around five million mortgages in Spain (as of November 2022), of which 3.7 million are variable-rate mortgages.
Households in this situation are the hardest hit by the constant rises in the Euribor (the European interbank offered rate), which stood at 2.8% on 23 November 2022.
What is the Euribor?
The Euribor is the average interest rate at which a large number of European banks claim to lend to one another on a short-term basis in order to lend to third parties (individuals and businesses).
With variable-rate mortgages, the instalment and interest are adjusted at each review (usually every six or twelve months), whilst with fixed-rate mortgages the instalment remains constant and stable as agreed between the bank and the customer.
It is also possible to take out a hybrid mortgage that combines a fixed and a variable component (it is common to pay a fixed-rate instalment for a number of years and then a variable-rate instalment for a further period).
Remember that it is legally possible to change the terms of your mortgage (novation) and that you can transfer your mortgage to another bank to secure better terms (subrogation due to a change of creditor).
As part of this subrogation, you can change both the person (individual or legal entity) who will take over the mortgage payments and the bank that will assume the remaining balance of the loan (with the bank bearing any amendment fees, depending on the bank’s policy).
Can I buy a new-build apartment by the seaside if I have applied for this assistance?
The scheme is only aimed at families and individuals who already have this debt with the bank, and not at new borrowers.
Similarly, as we have already mentioned, it is only intended for a main residence and not for the purchase of a second home or subsequent properties, although the scheme does highlight the Code of Good Practice, which is beneficial for all users of such properties.
Another requirement that would not be met (if you wish to buy a new-build apartment by the beach) is that the debt with the bank must have increased by 20 per cent in recent months (as this timeframe has not yet elapsed for a newly taken-out mortgage).
If you’re still dreaming of a beachfront semi-detached house or a new-build apartment by the beach and need to apply for a mortgage to make it happen, here’s a link to the beachfront semi-detached house page where you can calculate the APR of your mortgage and compare loans from different banks.