The Government urges banks to quickly find a consensual solution to help those vulnerable families who in the coming months will not be able to pay their mortgages due to increases in the Euribor. Sources from several banking entities point out that, in recent days, the department of the first vice president, Nadia Calviño, has increased the pressure for them to reach an agreement on the support formulas for those mortgaged with problems. It will not be easy because they start from very different positions. If CaixaBank proposes a one-year deferral, other banks want individual solutions for each client.
It is estimated that increases in the Euribor can mean an increase of more than 2,500 euros a year for some families. At this time, the Euribor stands at 2.562%, when last August it was at 1.249%. Afterwards, each client has agreed on a spread with their bank based on their relationship with it.
In Spain, there are 6.5 million families with a mortgage, of which approximately 75% are at a variable rate, most of which are referenced to the Euribor, although there are still some that take other indices or foreign currencies as a reference.
According to industry sources, banks have quantified that around 14% of households have a higher financial burden than they should be, which translates into some 400,000 vulnerable households. In some cases, the financial burden is not only recorded by the mortgage, but other bank debts must be added, such as consumer loans for the purchase of cars or other durable goods. The average interest rate on consumer loans is above 7%.
The debate between the Government and banks focuses on which households will be included as vulnerable. In the covid crisis, among the measures adopted by the Executive there was a moratorium on mortgages for low-income families or in ERTE and another moratorium for the self-employed and SMEs. In the case of moratoriums for mortgages, the bank had to raise the economic thresholds of the Government so that more clients could be accepted and they were negotiated on a case-by-case basis.
Hence, the Government is now seeking to define very well the criteria of a home classified as vulnerable based on children, dependent or disabled dependents, affected by gender-based violence… and to set an income threshold per family based on the aforementioned variables. It seeks to adapt the definition of vulnerable to the current crisis.
For Santos González, president of the Mortgage Association, the solution involves two possible measures: “either a moratorium or lengthen maturities and lower installments.” In the second case, it means that the life of the mortgage loan is lengthened, with the consequent increase in the final bill, but for this expert, “the key is that in these coming months of recession, families do not drown with the mortgage and end up in eviction”.
The discrepancies between financial institutions jumped last week when CaixaBank proposed a one-year deferral of mortgages for vulnerable families. The announcement did not sit well with the AEB entities, nor was it understood by some banks belonging to CECA because a consensus solution was being sought. Some sources point out that the agreement could be closed by the end of this week, although the small print must be redacted later. Then it would be made public.
