“Banking Sector’s Mortgage Offerings for Young People Under 35: A Comparison”

Last week Pedro Sánchez, Prime Minister, once again announced a measure in two areas that could attract votes: young people and housing. Sánchez announced that he would launch a line of ICO guarantees for children under 35 years of age that cover 20% of the mortgage. On Tuesday, the Governing Council approved it. The measure caused a stir and provoked the rejection of political parties and it was pointed out that it was not the solution. Many banks already have specific mortgage loans for these clients. They have their welcome, but not in a massive way. In most cases, financing is 90-95% of the home’s value.

From the banking sector they assure that young people are a strategic group. Bankinter is one of the banks that has a specific product for young people. From the entity they point out that approximately 20% of the new mortgage production in recent years (2021, 2022 and so far in 2023) corresponds to clients between 18 and 25 years of age. The entity only offers a variable mortgage for this customer segment (Euribor +0.70% with conditions or Euribor +2% without complying with them) and it is aimed at people under 36 years of age. This product offers up to 90% of the value of the home, taking as reference the lower value between the purchase price and the appraisal value. Bankinter points out that it will be in force until June 15, 2023.

For his part, Santander Bank It also has a product aimed at people under 36 years of age, which finances up to 95% of the value of the home, so that young people do not have to make such a large outlay. The bank launched a specific campaign for 1,000 mortgages in April 2021. In eight months they managed to complete it. This caused them to reissue it in February 2022 with the aim of financing up to 1,000 million euros in mortgages for 5,000 young people to access their first home. In the first six months of the campaign, almost 900 new mortgages were signed.

Currently, Banco Santander does not offer data on how many people under 35 take out mortgages with the entity, but they do point out that the demand has its weight because this age group is common in the acquisition of a first home. The product is still running and sources from the entity say that “it continues to be well received”. It finances up to 95% of the value of the home on the condition that the client does not exceed 35 years of age, is for the acquisition of the habitual residence and provides a joint and several personal guarantee, that is, a guarantee, sufficient from third parties. If the home is in the Community of Madrid, the bank has an agreement with the Government so that this is its guarantee of up to 20%. The mortgage can be fixed or variable with the interests that the bank currently has in force for any of its clients.

“Young people are a strategic group for Unicaja Banco”, assure from the entity. For this reason, the bank offers specific products and services for these customers. An example is that of young mortgages. In this case, the financing offered by Unicaja is up to 80% for the first homes. but the APR is a little lower for those under 35 years of age (the public to which this product is directed). In the case of the fixed-rate mortgage, for young people it is an APR of 4.24% and for the rest of the clients it is 4.29% (with discounts). In the case of the variable mortgage, for young people it is Euribor +0.60% from the second year and for the rest of the clients Euribor +0.65%, although they have a higher bonus for payrolls of more than 2,500 euros, which is Euribor +0.50%

Outside of large entities, Ibercaja also offers a mortgage for young people under 35 that finances up to 95% with interest from 3.25% in the case of fixed-rate mortgages and from Euribor +0.60% in variable rates. It must be borne in mind that to lower the interest you have to contract many products such as direct debit of payroll and receipts, home and life insurance, systematic contribution plan and credit card. Its minimum amount is 100,000 euros, so keep that in mind if you buy a cheap home. The maximum term is 25 years. It does not have an opening commission. However, it does include commissions for total or partial early repayment.

Ibercaja is also part of the agreement with the Community of Madrid, with which the Government guarantees up to 20% of the home if it is located in the community and has a value of less than 390,000 euros. CaixaBank is the third financial entity that is included in the agreement with the Madrid Government.

Finally, KutxaBank is the entity that offers the best conditions for young people. It is aimed at people under 36 years of age and finances up to 95% of the purchase. In the case of the variable mortgage, the entity offers Euribor +0.39% until the age of 35 (2.53% the first year). Thereafter, interest will be Euribor plus 0.49%. However, the client will have to hire several bank products to get that interest: direct payroll, take out home insurance and open a pension plan, but the conditions can be improved if the profile is good. The term to return is up to 30 years.

Julio Díaz, professor at the CEF.-Centro de Estudios Financieros and UDIMA, explains whate the initial amount is a significant access barrier, but it must not be forgotten that the acquisition of a home is a generational purchase. For this reason, the professor points out that the problem is “not having the security of being able to generate recurring income (via salaries or via entrepreneurship) during the useful life of the mortgage.” He acknowledges that such a high endorsement or financing alleviates the first barrier to entry, but “we continue to encounter the endemic problem of job insecurity, much more pressing and with more persistent effects in the medium and long term.”