The reference to Spain’s mortgage market finds itself at a level similar to a decade and a half ago, before the financial shock. In that climate, fixed-rate loans remained steady while variable-rate loans surged. Throughout the period there were policy tools designed to soften the impact of crises, including measures linked to Euribor.
State aid: Code of Good Practice for Banks
The Code of Good Practice was created by Royal Decree No. 6/2012 of 9 March to support underfunded mortgage borrowers. It gathers recommendations to ease loan payments, and more than 50 financial and credit institutions joined the initiative on a voluntary basis.
The government is assessing vulnerable households that fall below exclusion thresholds. Family units with annual income not exceeding 29,400 euros and a mortgage burden rising more than 20 percent, or that absorb 30 percent of net household income, may qualify for support.
Another option targets family units whose income does not exceed three times the Public Income Indicator (IPREM). With IPREM in 2023 at 8,400 euros per year, the maximum income would be 25,200 euros. Additionally, the monthly mortgage payment must have increased by at least 50 percent in the prior four years.
The policy also ties benefits to mortgage terms: the loan must be for a habitual residence and not exceed 300,000 euros at the outset. A further condition is that the creditor institution must be among those participating in the Code of Good Practice.
What do regulated institutions offer vulnerable borrowers?
Institutions adhering to the Code provide a three-step approach tailored to each situation. The first step helps vulnerable borrowers reduce capital depreciation until full repayment, potentially extending the term up to 40 years and offering an interest rate reduction for five years.
If this restructuring is insufficient, a second option allows the lender to make an offer that effectively erases all debt. Finally, if neither of the prior measures works, borrowers may pursue a debt settlement plan, which, while drastic, is intended to restore financial viability. Acceptance by the lender is required for the plan to proceed openly.
In the second scenario, families can remain in their home for two years while maintaining an affordable income.
What do the rules offer the ‘middle class’?
For family units with annual gross income under 29,400 euros, support is available for loans with a mortgage burden over 30 percent that has increased by at least 20 percent. The aid includes freezing monthly payments for one year, an interest rate reduction for the same period, and a total loan maturity not exceeding 40 years.
The policy aims to stabilize households while they regain financial footing and ensure housing stability during periods of income stress. These measures are designed to be temporary and targeted to those most in need, with the state coordinating with lenders to implement the terms.
ICO guarantee line for new mortgage holders
Since May 2023, the government has offered ICO guarantees. About 20 percent of the mortgage is covered for young buyers under 35 and for families with dependent children. These guarantees help applicants who have the income to support a mortgage but lack the savings for a large upfront payment.
Eligibility generally includes annual earnings below 37,800 euros and up to 4.5 times the IPREM. For households with two earners, the limit doubles accordingly. The home must be the applicant’s permanent residence and meet a minimum energy standard of level D. Interested applicants can apply through the financial institution issuing the mortgage, as with other mortgage products.
Notes: This overview reflects policy as of the latest available guidelines and overseen practices from public and private sector bodies. It cites official decrees and program rules in effect at the time of publication, and is intended to provide a practical summary for borrowers seeking relief and lenders coordinating with policy frameworks. Attribution: official government policy summaries and regulatory guidance.