Impact of the Eurbor rise


The pact between the Government and banks establishes new vulnerability profiles that will be eligible for aid, although entities will not be obliged to apply them if they do not adhere

A man walks past a bank window.EFE
  • eurbor Government and banks close an agreement to alleviate the mortgages of families before the rise of the Eurbor

At the stroke of midnight, the Government and the banks closed the core of the agreement on mortgage aid measures that will alleviate the pressure due to the increase in Eurbor and inflation on the most vulnerable families. The Executive intends to approve it in the Council of Minister this Tuesday and hopes to thus activate a mechanism that would give alternatives to more than a million homes in the country.

Of course, everything will depend on the entities that finally decide to apply it, because the pact does not contemplate mandatory, but voluntary when adhering to it. In this regard, the First Vice President of the Government and Minister of Economic Affairs, Nadia Calvio, has expressed this morning his confidence that all financial institutions apply it. “I am confident that all entities will join, because it is time to pitch in and help. I think that those who do not join will have a high reputational cost,” she stated in an interview on RNE.

Which entities will apply the pact?

It is one of the aspects that is not yet known in detail. The agreement has been signed by the Government with the Bank of Spain and the large employers in the sector: AEB, CECA and UNACC. The main entities of the country and also credit unions and credit unions are represented in these, but the key is that the pact is not mandatory for all of them, but voluntary adherence for those who deem it appropriate. In this sense, Calvio explained that the agreement with the entire banking sector has not been confirmed because some bank employers were unable to consult the text with all their members last night.

Of course, those entities that adhere to the agreement, will have to apply it in a mandatory manner and for this, the Vice President of Economic Affairs has pointed out that there will be mechanisms to verify the compliance of the entities: the Code of Good Practices itself provides for a control commission to monitor compliance with these measures and also this Tuesday the creation of the Financial Client Defense Authority will be approved, which will include powers in this regard.

Who can apply for aid?

The Government calculates that more than a million families will be able to see their situation alleviated.

On the one hand, all those who were already considered mortgage debtors in the exclusion threshold by the Banking Code of Good Practices, in force since 2012. Among them, the large family, the family unit single parent with dependent children, the family unit in which any of its members has declared disability higher than 33%, the family unit in which there is a victim of gender violence orthe debtor older than 60 years. Also those households in which the total income of the members of the family unit does not exceed the limit of three times the annual IPREM of fourteen payments (about 25,200 euros per year).

In these cases, vulnerable debtors will have the possibility of restructuring the mortgage loan with a interest rate lower during the 5-year principal grace period (Eurbor -0.1% compared to the current Eurbor + 0.25%). Likewise, the term to request the dation in payment of housing and the possibility of a second restructuring is contemplated, if necessary.

In addition, with the aim of expanding the scope of action, households with an income of less than 25,200 euros a year are allowed to dedicate more than 50% of their monthly income to paying the mortgage but do not meet the current criteria of a 50% increase in the mortgage effort, can take advantage of 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.

How much will they pay?

According to government and bank calculationsa family with a typical mortgage of 120,000 euros and a monthly payment of 524 euros After the interest rate review, you will see your fee reduced by more than 50% during the five-year grace period, up to 246 euros.

Vulnerable new customers

The pact intended to extend protection to households that are not vulnerable but could be dragged into that situation by the persistent rise in prices. For these profiles, it is proposed a new Code that provides relief to middle-class debtors at risk of vulnerability due to the increase in mortgage fee.

Specifically, the agreement contemplates that households with income less than three and a half times the IPREM (29,400 euros per year) with mortgages subscribed until December 31, 2022, a mortgage charge greater than 30% of their income and that has risen by at least 20%. For them, financial institutions must offer the possibility of freezing the installment for 12 months, a lower interest rate on the deferred principal and a extension of the term of the loan up to 7 years

Finally, expenses will be reduced and commissions for facilitate the change from floating rate to fixed rate and commissions for early amortization and change of mortgage from variable to fixed rate will be eliminated throughout 2023.


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J. A. Allen

Author, blogger, freelance writer. Hater of spiders. Drinker of wine. Mother of hellions.

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