Government’s plan to ease the mortgage burden of the most vulnerable households, “a short-term solution at long-term cost”

To alleviate the plight of these vulnerable people, the Government this Tuesday passed a bill in the Cabinet of Ministers. aid package that banks must be implanted In the Code of Good Practices if they comply with the plan that will come into effect from January 2023.

What do these aids mean? Who can qualify for them? And how will they affect the mortgagee in the long run? A priori, the iAhorro spokesperson assures that this is a “short-term solution with long-term costs.” But to analyze this, the first thing to consider is what the mortgagee can take, depending on their vulnerability. some aid or others, the Government explains.

The government views these households as “vulnerable mortgage borrowers” under this scheme. with an income of less than 25,200 euros or the same, three times the IPREM; Besides devote more than 50% of their monthly salary to mortgage payments and they saw how their monthly installments for the loan also increased by 50% (iAhorro explains, for example, those who went from paying 300 euros a month to 450 euros). These people will be able to benefit from a variety of measures:

• They can request a grace period of 5 years for the redemption of the capital.

• They can request an extension of the repayment period up to a total of 40 years from the issuance of the loan.

• And they can take advantage of the 0.1% interest rate discount applied to Euribor during the grace period.

Laura Martínez, spokesperson for iAhorro, said: “The single major innovation for these most vulnerable households is the Government’s further reduction in interest rate during the five-year grace period: a -0.1% reduction in the Euribor interest rate will be applied from the Euribor + 0.25% covered by all Good Practice Codes so far; The rest of the aid was already available and the mortgagee could ask for it if they needed it”.

In this case, if Euribor is 3%, the mortgagee will pay 2.9% interest on the mortgage for five years. does not amortize capitalSo once the grace period ends, the money outstanding will be the same as it was before it started,” adds Martínez, “predicting that, on a general level, the mortgage will become more expensive.”

And this “not the same as a moratoriumMore than just a grace period in which principal depreciation is delayed but interest is not paid,” explains a spokesperson for the iAhorro mortgage comparator, which benefits many households as was done during the pandemic and the payment of the total mortgage installment (both principal and interest) was delayed.

Clearer with an example: Those who made a mortgage contract of 150,000 Euros in January 2018 will now pay 451.42 Euros in installments and in January 2023, instead of paying the 695.11 Euros that they would touch upon themselves if they took advantage of this measure. the revision would pay only 307.10 Euros corresponding to the tax payment. And so on, until 2027, when the mortgage’s five-year grace period will expire. However, at the end of the mortgage period, you will pay a total of 70,348.62 Euros of interest, which is more than if you did not benefit from the Government measure (65,035.53 on the entire loan). If the loan amount was 300,000 Euros, this increase would have doubled.

In this section, the Government, who have an annual income of less than 25,200 euros and allocate more than 50% of their monthly salary to paying the mortgage, “Does not meet current criteria for a 50% increase in mortgage effort”. Measures that may be beneficial include:

• A two-year grace period at redemption of the mortgage.

• A lower interest rate during the grace period.

• Extension of the loan repayment period up to seven years.

The difference we see at first glance with the previous assumption is that the grace period has increased from five to two years. Regarding the decrease in the interest rate, how much lower is not specified ”, analyzes Laura Martínez. The government will also allow an extension of up to 7 years in this case, but a spokesperson for iAhorro states: “the longer the mortgage lasts, the more interest You will pay in the end.”

The government considers it the “middle class at risk of vulnerability”. income less than 29,400 euros per year (3.5 times IPREM), contracted mortgage until 31 December 2022 and Mortgage fees of more than 30% of your rent, in addition to the monthly fee increased by at least 20%. Those who meet these conditions can benefit from:

• Possibility to freeze the fee for 12 months.

• A lower interest rate for the deferred principal.

• Extension of loan term up to 7 years.

In this sense, the spokesperson for iAhorro said, “We do not understand the government’s treatment of households earning 29,000 euros as middle class. If the household consists of two working people, it does not earn even 15,000 Euros per person… and With these salaries, it’s almost impossible for any bank to give you a mortgage. Like housing prices in Madrid or Barcelona. Yes, they can be issued in Extremadura or Castilla-La Mancha, where there are houses that certainly cost less than 100,000 euros. According to the INE, you cannot put a general income for the whole of Spain when there is a difference of 15,000 euros between the average income of households in Extremadura and the average income of households in the Community of Madrid”.

The government also approved the measures taken on Tuesday. facilitate the transition from a variable rate mortgage to a fixed rate and removal of early payment commissionssomething that Laura Martínez values ​​positively. Of course, the iAhorro spokesperson warns: “The fixed rates are now around 2.5% and banks may even offer a higher interest rate to those who have a mortgage and want to change it, so it will be necessary to see if they will actually come out. It hasn’t benefited”.