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MADRID: The Spanish government and banks have agreed in principle on mortgage relief measures such as loan repayments for more than one million vulnerable households and on help for middle-class families, the economy ministry said on Monday.
The ministry said the new measures are expected to be approved at a cabinet meeting on Tuesday, pending final talks with banking associations.
The Economy Ministry did not provide details on the potential cost to lenders and the extent to which banks may have to set aside more provisions in the future is unclear.
Yet non-performing loans at Spanish lenders were at a near-record low of 3.86% as of August, well below the all-time high of 13.6% in December 2013.
In spainNearly three-quarters of the population are homeowners, with the majority opting for floating-rate mortgages, which are exposed to interest rate hikes.
The planned measures are part of a wider package of support to help ease the pressure of living which includes rebates on fuel costs and unexpected tax proposals. Other countries such as Hungary, Portugal, Poland and Greece have approved various forms of mortgage subvention.
In Spain, banks will provide mortgage support for vulnerable families through a revised industry-wide code of good practice. The income limit has been set at 25,200 euros ($25,815).
Vulnerable households will be able to restructure the mortgage at a lower interest rate during a five-year grace period, already set out in a 2012 industry-wide code of good practice, which is voluntary but once mandatory for lenders to follow it happens.
Grace periods allow borrowers to delay payments on loan principal without being charged late fees and prevent default or loan cancellation.
The loan cancellation period has been extended by two years and includes the possibility of another restructuring, if necessary, the ministry said.
Vulnerable households who spend more than 50% of their monthly income to repay their mortgage, but do not meet the condition prescribed in the previous code of increasing their mortgage payment by 50%, can avail a grace period of two years. Can
The government will also introduce a new code of good practice for middle-class households at risk of vulnerability, setting an income limit of less than 29,400 euros.
In those cases, lenders must offer the possibility of a 12-month moratorium on repayment, a lower interest rate on deferred principal and an extension of the loan if the mortgage burden represents more than 30% of household income and costs have increased less. less than 20%.
The measures would also make it less expensive for households to switch from variable-rate mortgage contracts to fixed-rate contracts.
The mortgage relief is expected to take effect next year.
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