Banks are being more agile when it comes to refinancing individual mortgage loans on their own than the mechanism promoted by the Government to prevent families in difficulty from being in serious trouble due to increases in interest rates. So far this year, the renegotiations of housing loans agreed bilaterally between individuals and their entity have quadrupled those of the Government plan, full of requirements and limited specification when compared to the number of people who request it. .
According to the latest data published by the Bank of Spain, between January and October bank loans for home purchases were refinanced for 3,769 million euros, almost double the 1,910 million for the whole of 2022. It is a strong increase that responds to the increases in interest rates and, with it, the increase in the cost of the mortgage payment for variable loans.
Mortgage loan refinancing has doubled this year due to rate increases
This volume of bank renegotiations is much higher than the nearly 820 million euros that, according to calculations by the Bank of Spain, represents the lifeline that the Government and the banks agreed to a year ago to prevent families from drowning in the rises in the mortgage payment. This year, the plan has covered household incomes of less than 29,400 euros, but starting in January the limit will rise to 38,000 euros, which will reach more deeply the middle class, which the Ministry of Education wants to reach. Economy.
The relatively small amount of refinancing with the new code cannot be considered a failure, but rather the opposite. The economy, as the banks themselves acknowledge, has performed better than expected and, if there have not been many mortgage holders looking for the Government’s lifeline, it has been because they have not done so badly. The banks, initially reluctant to accept the code of good practices due to the risk of having to make provisions, have readily agreed to extend it to 38,000 euros.
However, the Government’s mechanism suffers from the low percentage of applications that end up being successful, just 12%. Between January and October there were 54,928 mortgage holders, 0.9% of the 6.2 million in Spain, who requested help for a loan volume of 6,839 million euros, 1.5% of the total, equivalent to about 450,000 million.
Of all the requests, only 6,941 were successful. 57% of those already processed were denied for not meeting the requirements, which include that the home have a value of less than 300,000 euros or that the mortgage payment exceeds 30% of the household income. There were also 21% of the cases in which the client gave up.
This aid from the code of good practices consists above all in granting a grace period of one year in which the mortgage is frozen and in the reformulation of the installment by extending the term of the loan by seven years.
The Government mechanism suffers
At first, the Government publicized the new plan, estimating its potential beneficiaries at one million people, but it already recognizes that the scope is much smaller. It now accepts the figures from the Bank of Spain as good, which places the universe of potential beneficiaries at 549,000 and calculates that, by expanding the plan to incomes of 38,000 euros, another 100,000 will be able to join.
In her appearance on Monday to announce the expansion of the code, the Minister of Economy herself, Nadia Calviño, alluded to the refinancing that banks do on their own as a factor to reduce the pressure on mortgage holders. “We must add the relief measures that the entities provide,” acknowledged the minister.
Banks do not see the need to increase the scope of the code of good practices
For banks, increasing the scope of the code of good practices is not “strictly necessary”, as explained by the general director of the Spanish Banking Association (AEB), María Abascal. Her thesis is that customer behavior has been better than expected and that, in this context, entities have the capacity to respond to their needs. “For us, success is that whoever has a problem can have a solution,” she said.
Despite not considering it necessary, the banks have agreed to raise the income eligible to benefit from the code of good practices to 38,000 euros. Unlike what happened a year ago, they now do not fear a scenario in which they will be forced to make heavy provisions to cover the increase in doubtful loans. The scenario of a decade ago, in which renegotiations were around 10,000 million euros per year, is far away.
Less delinquencies than before the pandemic
Against all expectations, bank bad debts have not increased with the increases in interest rates, mainly due to the good performance of the labor market. Refinancing has also helped prevent many loans from going into default. At the end of September, the default stood at 3.56%, the same percentage as in January. The surprising thing is that it is also below the 3.85% registered in July of last year, when interest rates were at minimum levels and the ECB began to raise them.
According to data from the Bank of Spain, the current level is also lower than the 4.79% in 2019, before the pandemic. Despite the good appearance of the general photograph, the pressure is focused on vulnerable groups. The Government will include in the omnibus decree that will be approved this week an extension of another half year in the prohibition of evicting vulnerable families who do not have a housing alternative, as La Vanguardia reported. The rule will include more elements related to housing, including maintaining the 3% limitation on rent increases during 2024.
2023-12-25 05:37:09
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