2023-05-07 15:54:16
The Prime Minister, Pedro Sánchez, has announced that the Official Credit Institute (ICO) will guarantee young people 20% of the cost of buying a home. This percentage is added to the 80% normally provided by banks, so that no prior savings will be necessary to own a flat. This measure, commented by the general secretary of the PSOE, during the presentation of the party’s candidacies in Santa Cruz de Tenerife, is already in force in some of the communities governed by the Popular Party, such as the Madrid’s community, Andalusia and the Region of Murcia.
Since the bursting of the housing bubble, between 2008 and 2012, financial institutions have become much more restrictive in the loans they grant to families who want to buy a home. While in 2006 up to 100% or 110% of the acquisition cost was financed, now rarely do loans exceed 80%unless family guarantees are provided.
This means that, for a 30-year-old who wants to buy a 200,000-euro home, they will need to have prior savings of more than 50,000 euros. First, you must have 20%, to which must be added the Property Transfer Tax (ITP), which must be paid to the tax authorities as soon as the sale is closed and, depending on the community, varies from 6% to 11%. . In addition, there are other expenses, such as notary, registration or appraisal of the property. With all these outlays, the necessary savings to be able to take the step to own a property amounts to 30%a brake for many young people and families.
How do public guarantees work?
The measure that Pedro Sánchez has now announced is internationally known as Help to Buy. The UK Government launched it in 2013 to facilitate access to housing for young people and the country’s main financial institutions have been asking for its implementation here for years. In this model, the bank does not give a mortgage at 80%, but at 95% or 100%; but a public administration endorses everything that exceeds 80%. In the event of non-payment by the buyer, the entity would execute the guarantee to the administration and later recover ownership of the property.
The Community of Madrid launched it in July of last year, under the name of My First Home. For it, endowed 18 million euros, which were transferred to three banks: Banco Santander, CaixaBank and IberCaja. The main requirements were to be under 35 years of age and to buy a flat for less than 390,000 euros. Despite being a positive measure to facilitate accessibility, his journey is smallas revealed by EL PERIÓDICO DE ESPAÑA, from the Prensa Ibérica group, since it will only reach a very small percentage of the population, between 450 and 650 young people. By mid-April, as confirmed by the regional government, 307 people had benefited.
The Region of Murcia It has been doing it before Madrid, since May 2021. In his case, the maximum price of the house to benefit from the measure is 175,000 euros and guarantees up to 100%, 5% more than in the capital. The beneficiaries must not collect an income that exceeds 5.4 times the IPREM (38,880 euros) and the participating banks are Cajamar, Bankinter, Caja Rural Central and Caja Rural Regional.
Andalusia also announced that it would start up in February of this year. The Board will allocate up to 20 million euros to guarantee 95% in flats that do not exceed 295,000 euros, although they leave the door open to extend the amount to 100%, as long as the property acquired has the highest energy rating.
Does guaranteeing 95% of the purchase of a home for young people work?
Real estate experts welcome these types of measures because they encourage the market. However, the current scope is limited because it is the administrations that transfer the capital to the banks, immobilizing large amounts for several years. This limits the lines of guarantees because they have to be charged to the budgets of each region. On the contrary, as they are guarantees and not subsidies, It is money that, in most cases, will be recovered by the public treasury sooner or later.
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The economist from the University of Barcelona, Gonzalo Bernardos, proposes that these guarantees be made through insurance contracted by the administrations, so that they do not have to immobilize capital for a long period, but rather pay an annual premium.
One of the negative points is that benefits the youths wealthier versus those who earn less, especially in the current economic situation of interest rates. The entities want the mortgaged to be solvent and do not grant mortgages if the monthly payment exceeds 30% or 35% of the rent. This means that if a young person requests 150,000 euros for 35 years at a Euribor rate, they will have to pay 665 euros per month and the bank will only grant the credit if they collect more than 2,200 euros, in the event that there is only one beneficiary.
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