Policy changes are being set in motion to expand access to social services and housing support for 50,000 young people and families with young children. The aim is to guarantee affordable housing by backing mortgages for home purchases. The executive has clarified that no banks will bear new costs for processing these guarantees, reversing an earlier spring-time announcement. Although the precise commission to be paid to the organizations remains undecided, the state will not subsidize the full cost; instead, a portion will be allocated, and millions of euros will be redirected to banks as an incentive for cooperative behavior and proactive, credit-ready endorsements.
On May 2023, following approval by the Council of Ministers to greenlight a line of guarantees, the EU Ministry of Transport Mitma and the Official Credit Institute ICO formalized the framework for these guarantees as in the previous June, when the legal basis was established. The government stressed that the guarantee costs would be absorbed by Mitma on behalf of the guarantor entity. However, after the agreement set the general terms for guarantee coverage was approved, the housing ministry noted that the plan would not incur any cost for either beneficiaries or the financial institutions involved.
Government sources explain that European rules require public guarantees offered to private companies to carry a cost to the banks, intended to prevent market distortions. They add that this requirement does not apply in the same way to guarantees extended to individuals. In this context, they recall the guarantees created during the pandemic to help tenants access loans, covering up to six months of rent or housing costs when needed. Doubts soon arose about whether the same criteria would apply to mortgage guarantees as well.
As an illustration, the government created guarantees for companies in 2020 to avert a wave of bankruptcies caused by the crisis, with banks facing costs ranging roughly from 0.2 to 1.2 percentage points on the guaranteed amount. By the end of April, banks had deposited about 1,721.3 million euros with the ICO as remuneration for receiving these guarantees, while the ICO had collected about 520.9 million euros from penalties for defaulted loans that it had agreed to cover (between 60% and 80% of unrecovered amounts). If the same scheme had been applied to mortgages, the expected 10-year program could have involved costs for banks of roughly 50 to 300 million euros. It is important to note that guarantees differed by category, with some directed at businesses and others at individuals, which would likely affect how commissions were set.
Banking sector observers await details of the mortgage guarantee line. The official bulletin is expected to publish the cabinet agreement and the general conditions, and housing ministry along with ICO are anticipated to sign a formal agreement detailing the financial terms. The plan gained early support from industry leaders, but some banks remain cautiously optimistic, acknowledging that participation might be prudent to avoid friction with the government.
Maximum price and eligibility
A cornerstone of the new line is that the state will guarantee up to 20 percent of the value of mortgage transactions, measured as the lower amount between the appraised value and the purchase price. This arrangement aims to enable banks to finance 100 percent of purchases, while buyers would only need to come up with a 10 percent down payment to cover ancillary costs such as taxes, notary fees, and registry charges. General eligibility will include income thresholds and asset limits: individuals earning up to 37,800 euros gross per year (or double that for dual-income households) and households with assets not exceeding 100,000 euros. In the agreement between the housing ministry and ICO, the maximum price or appraisal cap for homes financed under the line will be defined, with possible regional adjustments based on location.
Assuming prudent lending practices, where mortgage payments should not exceed about 30 percent of an borrower’s income, the typical net monthly income estimates suggest a maximum monthly payment aligning with home prices around 145,500 euros for a single borrower, yielding roughly 730 euros per month. For two buyers, higher ceilings apply, potentially around 291,000 euros in purchase value with monthly payments near 1,460 euros. These figures align with the national average mortgage values observed in recent reports, reflecting a balance between affordable housing and stable loan risk.
The overall approach emphasizes meaningful access to home ownership while ensuring financial institutions manage risk through clearly defined guarantee terms and cap levels. The policy also underscores regional flexibility, allowing cap levels to adapt to local housing markets and cost-of-living variations. The government’s intent is to create a wide-scale, stable mortgage path for families, supporting household stability and social equity without imposing undue burdens on lenders or beneficiaries.
[Citation: Government briefings and industry analyses published in public records and press interviews provide context for these developments.]