Bank of Spain delays mortgage relief decision

23 Nov 2023 CW Team

Last week, Prime Minister Pedro Sanchez of Spain announced that the new coalition government was considering raising the annual income threshold for qualifying for mortgage relief support to 38,000 euros ($41,283) as part of a broader set of measures aimed at assisting families in coping with increased borrowing costs.

Speaking at a financial event in Madrid, De Cos stated, "In this central scenario, where the economy is still slowing down but could see a recovery in 2024, we find no need to amend the code of good practice."

As per the updated industry-wide code of good practice, Spanish banks are now expected to offer mortgage support to vulnerable families earning less than 25,200 euros per year. Additionally, middle-class families with an income of less than 29,400 euros, at risk of defaulting, would also receive extra protection.

Approximately three-quarters of the Spanish population own homes, making them particularly vulnerable to an increase in interest rates, as over 70% of their more than 4 million outstanding mortgage loans carry variable rates.

The average cost of a mortgage in Spain rose to 3.84% as of August, compared to 2.03% in the same month in 2022.

In November 2022, the Spanish government approved mortgage relief support for over one million vulnerable households. However, as of the first seven months of 2023, only 42,000 requests have been submitted, according to data from the Bank of Spain.

De Cos noted, "We have observed that the use is still limited, and our assessment of this fact is that the economy has been performing reasonably well. We have all been surprised by the strength of the labour market."

Bank of Spain Governor Pablo Hernandez de Cos expressed his view that, currently, there seems to be no necessity for banks to potentially prolong mortgage relief measures for vulnerable households, given the limited utilisation by citizens thus far. Last week, Prime Minister Pedro Sanchez of Spain announced that the new coalition government was considering raising the annual income threshold for qualifying for mortgage relief support to 38,000 euros ($41,283) as part of a broader set of measures aimed at assisting families in coping with increased borrowing costs. Speaking at a financial event in Madrid, De Cos stated, In this central scenario, where the economy is still slowing down but could see a recovery in 2024, we find no need to amend the code of good practice. As per the updated industry-wide code of good practice, Spanish banks are now expected to offer mortgage support to vulnerable families earning less than 25,200 euros per year. Additionally, middle-class families with an income of less than 29,400 euros, at risk of defaulting, would also receive extra protection. Approximately three-quarters of the Spanish population own homes, making them particularly vulnerable to an increase in interest rates, as over 70% of their more than 4 million outstanding mortgage loans carry variable rates. The average cost of a mortgage in Spain rose to 3.84% as of August, compared to 2.03% in the same month in 2022. In November 2022, the Spanish government approved mortgage relief support for over one million vulnerable households. However, as of the first seven months of 2023, only 42,000 requests have been submitted, according to data from the Bank of Spain. De Cos noted, We have observed that the use is still limited, and our assessment of this fact is that the economy has been performing reasonably well. We have all been surprised by the strength of the labour market.