Mortgages signed in the last five years will benefit the most from the aid that the Government and banks have agreed to alleviate the burden that the rise of the Euribor in full rate hike by the European Central Bank to control inflation. Both the Executive and the Bank of Spain the situation of the loans signed between 2017 and 2021 is concerned since, in practice, they are the ones that are bearing the highest interest burden on their monthly installment.
In Spain the The amortization system that is most used in mortgages is the French one.. The first years from the signing of the loan, with each monthly installment, interest is paid mainly and the borrowed capital is hardly returned. This implies that when a family has made half of the installments provided for in the mortgage contract, they will still not have repaid half of the capital that the bank lent them. In this system, the installments are constant month by month, whether it is a fixed-rate or a variable-rate credit, with the exception that in the second case the monthly payment will be reviewed at the appropriate time depending on how the Euribor evolves.
Contrary to what happens in other neighboring countries, a large percentage of Spanish families own a home. They are almost 76% compared to an average of 60.3% in the euro zone as a whole. The economist Javier Santacruz, a member of the Spanish Institute of Financial Analysts, points out that according to the latest data published by the ECB in its Household Finance and Consumption Survey (HFCS), six out of ten households with home ownership have a living mortgage. In the case of those whose situation is most vulnerable -the 20% with the lowest income- their debt to net worth ratio stands at 78.2% compared to 27% in the euro zone, according to figures from the issuer.
Home mortgage debt increases
During the current real estate cycle “mortgage debt for housing has experienced relatively intense growth” due to the impact of the increase in the price of real estate and the average surface area transferred, according to the Association of Registrars in its latest ‘Real Estate Registry Statistics’. In year-on-year terms, it has gone from 100,841 euros at the end of 2013 to current 143,658 euros. Despite this intense increase, home mortgage debt is still below the maximum levels reached in the previous bullish cycle, that is, the 151,432 euros it reached in 2007, in the middle of the price bubble and just before the last financial crisis broke out.
the data
CaixaBank Research calculates that an average household in Spain allocates seven years of their salary to purchase a home.
The current situation of the private sector and of the entities themselves has little to do with that of then, as both the Minister of Economic Affairs, Nadia Calviño, and the Governor of the BdE, Pablo Hernández De Cos, have highlighted on numerous occasions. The sector is healthier and more resilient after its successive restructuring processes and households have increasingly chosen to take out fixed-rate mortgages to protect themselves from increases in the Euribor.
This process has been taking place throughout more than a decade in which the price of money has remained at historical lows, which also indicates a significant change in mentality. Today, practically 70% of the mortgages that are constituted in Spain are at a fixed rate, as the Spanish Mortgage Association (AHE) points out. With regard to entities, they have seen how the delinquency rate has also gradually decreased. In September it fell slightly in relation to the previous month, to 3.79%, its lowest level since December 2008. The NPL rate stood a year earlier at 4.43%.
Several entities announce that they will apply a package of measures
To date, CaixaBank, Banco Sabadell and Unicaja have adhered to the Code of Good Practices for urgent measures for mortgage debtors at risk of vulnerability, approved by the Council of Ministers last Tuesday. The three entities adhere to both the extension of the code already in force and the new one for middle-income households at risk of vulnerability, which will have a two-year transitional regime.
It is estimated that the package of measures designed by the Ministry of Economic Affairs A total of more than a million households affected by the situation could choose rising rates and high inflation. This includes, among other measures, reductions in the interest rate during the grace period, the possibility that families can restructure their debt twice or the elimination of commissions for changing from variable to fixed mortgage or for repayments that be done over the next year.