The Spanish Council of Ministers yesterday approved a package of support measures for families that are vulnerable or on the verge of becoming vulnerable, totaling one million households. After several weeks of negotiations, the Spanish banking associations and the management sealed a memorandum of understanding in extremis late on the evening of Monday 21 November. Yesterday some technical details had to be completed.
The reason for the creation of these measures: the increase in the 12-month Euribor rate to more than 2.6% compared to -0.5% a year ago, following the ECB’s decision to raise interest rates to fight inflation. However, variable rate mortgages still make up around 70% of the stock of loans in Spain.
As part of this initiative, support measures for vulnerable families – whose income is less than 25,200 euros per year and whose mortgage amount is 50% or more of their income – have been intensified: approved in 2012, the Code of Good Practice (vswhereYou o of Buenas Practicas) will be extended and strengthened to allow these households to restructure their mortgages. The plan also includes a reduction in the interest rate for five years and an extension of the duration of the loan, which can go up to 7 years for these populations.
The Spanish leader also supported middle-class households, defined as having an income of less than 29,400 euros per year and whose loans represent more than 30% of income. A new code of good governance (vswhereYou o of Buen Gobierno) was thus proposed to enable these families to gradually adapt to the new interest rate environment. They will thus be given the opportunity by the banks to freeze monthly installments for 12 months and extend the term of their loan up to 7 years.
Mixed reactions from banks
On the sidelines of a financial event yesterday morning in Madrid, José Antonio Álvarez, CEO of the largest bank Santander, caused controversy by indicating that his establishment would not sign this agreement until the guarantees of a “healthy and solid mortgage market” would not be fulfilled. The trustee was particularly concerned about the impact of these measures on the bank’s provisioning levels and was waiting to know the technical details before adding his signature: ” as soon as there is an extension or extension, there are always elements that have a bearing on the provisions he reported.
Asked about this, the Minister for Economy and Digital Transformation, Nadia Calviño, stated that a work “intensive” had been completed with the Bank of Spain, so that the package of measures had a reduced effect from a credit rating point of view and did not cause a “significant impact” at financial institutions. “I hope that all the banks will subscribe “this agreement due to “On Monday night we did not have confirmation of unanimity from them, she said on Spanish public radio. For its part, the association of the Spanish bank AEB was also waiting for all the details before making a public statement.
Banks have one month to decide whether to comply with this package of measures. Implementation is expected on 1 January 2023.