The conditions of the bank and government agreement against the rise in the Euribor
Agreement between banks and the Government of Spain to save the variable mortgages. The day announced weeks ago by the Minister of Economy arrived, Nadia Calvinoand long awaited by the mortgaged that day by day see as the eurybor It shoots up making your mortgage more expensive with a variable rate with no ceiling in sight. The Executive will approve this Tuesday at the meeting of the Council of Ministers a package of measures to alleviate the mortgage burden to more than a million vulnerable households or at risk of vulnerability due to the increase in the Euribor, “preserving financial stability”. According to the Government of Pedro Sánchez, The measure will affect one million families and will come into force on January 1. Who will it affect? What requirements must be met?
Vulnerable families: income less than 25,200 euros
In the first place, measures are collected that improve the current Code of Good Practices for vulnerable mortgagees, approved in 2012, in order to adapt it to the current situation, thus giving option to restructure the loan with a lower interest rate during the 5-year principal grace period (Euribor minus 0.1% compared to the current Euribor plus 0.25%).
Likewise, term is extended to 2 years to request the dation in payment of the house and the possibility of a second restructuring, in necessary case. With the aim of expanding the scope of action, households with income less than 25,200 euros per year that dedicate more than 50% of the monthly income to the mortgage payment, even if the mortgage effort does not increase by 50%, they will be able to benefit from the Code with a grace period of 2 years, a lower interest rate during the grace period and an extension of the term of up to 7 years. For example, a family with a typical mortgage of 120,000 euros and a monthly installment of 524 euros after the interest rate review, will see their installment reduced by more than 50% during the five-year grace period, up to 246 euros.
Middle-class family at risk with income of 29,400 euros
A new Code is also proposed to alleviate middle-class families, with income of 29,400 euros per yearwhich are considered at risk of vulnerability due to the increase in the mortgage payment, which consume more than 30% of their income after a rise of at least 20%. For all these cases, financial institutions must offer the possibility of freezing the installment for 12 months, a lower interest rate on the deferred principal and an extension of the loan term of up to 7 years.
Finally will further reduce expenses and commissions to facilitate the change from variable rate to fixed rate and commissions for early repayment will be eliminated throughout 2023 and change from variable to fixed rate mortgage. The two Codes of Good Practices will be voluntarily adhered to by financial institutions and mandatory once signed.
Voluntary adherence by financial institutions
The two Codes of Good Practices will be of voluntary adhesion by financial institutions, which they will be obliged to comply with them once subscribed. In the event of transfer of credit to a third party, banking entities must guarantee the protection of this catalog of measures in case of transfer of credit to a third party. Financial institutions will be able to adhere to the Codes immediately and the objective is for the set of measures adopted to be available as of January 1, 2023. There are currently 3.7 million mortgages referenced to the Euribor.
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