- For families earning less than 25,200 euros
- Help also for households earning less than 29,400 euros
- Banks worried about increased provisions
- Measures include grace periods, extended repayment periods
- Banks have one month to comply with the measures
MADRID, Nov 22 (Reuters) – The Spanish government on Tuesday gave its approval for mortgage relief aid for more than a million vulnerable households and aid for middle-class families a day after the government and the banks have reached an agreement in principle.
The measures are subject to final negotiations with banking associations, Economy Minister Nadia Calvino said, adding that banks had a month to sign up before their planned implementation next year.
Santander (SAN.MC), Spain’s biggest lender, warned the measures could lead to higher bank provisions and more credit hurdles for customers, while other big banks said they always studied the fine print.
The ministry did not provide details of the potential cost to lenders and the extent of additional provisions banks may need to make remains unclear.
Santander CEO Jose Antonio Alvarez told reporters on Tuesday that loan extensions could also lead to higher capital consumption while making it harder for some customers to access credit. Read more
Alejandra Kindelan, head of Spanish banking association AEB, said her organization was still evaluating the measures, as was Caixabank (CABK.MC) CEO Gonzalo Gortazar.
Non-performing loans from Spanish lenders in August were at a near-record high of 3.9%, well below the record high of 13.6% recorded in December 2013.
In Spain, around three-quarters of the population are homeowners, with most opting for variable rate mortgages exposed to rising interest rates.
The planned measures are part of a broader package of support measures aimed at easing cost-of-living pressures, which includes a rebate on fuel costs and exceptional tax proposals. Other countries, such as Hungary, Portugal, Poland and Greece, have approved different forms of mortgage support.
Spanish banks will provide mortgage support to vulnerable families earning less than 25,200 euros ($25,815) a year through an amended industry-wide code of practice.
They will be able to restructure mortgages at a lower interest rate for a five-year grace period.
This will allow borrowers to delay payments on the loan principal without having to pay late fees and avoid loan defaults or cancellations.
The deadline for debt cancellation has been extended by two years and provides for a second restructuring if necessary, the ministry said.
Vulnerable families who devote more than 50% of their monthly income to repaying their mortgage but do not meet the condition set by the old code of a 50% increase in their monthly mortgage payments can benefit from a grace period. two years.
Middle-class families with an income of less than 29,400 euros who are at risk of defaulting will also benefit from additional protection.
In these cases, lenders must offer a 12-month repayment freeze, a lower interest rate on deferred principal, and loan extensions if a mortgage charge is more than 30% of household income and the cost has increased. at least 20%.
These measures will also make it cheaper for families to switch from variable rate mortgages to fixed rate mortgages.
($1 = 0.9762 euros)
Reporting by Jesús Aguado; additional reporting by Belen Carreno, Emma Pinedo, Inti Landauro and David Latona; edited by Emelia Sithole-Matarise and Jason Neely
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