Spain announces mortgage relief plan amid rising interest rates

By Alyssa McMurtry

OVIEDO, Spain (AA) - The Spanish government announced on Tuesday a new scheme to help households with variable-rate mortgages cope with rising interest rates.

“The truth is that even though the Euribor is below the historical average, it has increased sharply. This increase has had a significant impact on families, especially those that make less money and are already the most affected by inflation,” Spanish Economy Minister Nadia Calvino said.

In January, the Euribor, or the average rate that Eurozone banks offer to lend funds to other banks, sat at -0.48%. In October, the monthly average had risen to 2.63%.

To help the most vulnerable families cope with soaring monthly mortgage payments, Spain’s left-wing government hopes to offer them a five-year window in which they can pay mortgage rates at 0.15 percentage points below the Euribor — compared to 0.25 points more than the Euribor currently.

The package, which still has to be passed by Spain’s parliament, would also allow around 1 million of the most vulnerable households to restructure their debt more than once.

Households earning less than €29,400 ($30,195) per year and paying more than 30% of that on their mortgage would also have new benefits. For instance, banks would have to offer to freeze the interest rate for 12 months or increase the mortgage term by seven years.

At the same time, the government wants banks to eliminate any commissions for households switching from a variable to a fixed-rate mortgage next year or paying off their mortgages earlier than planned.

Under the plan, the government would also create a new agency to protect consumers. For the first time, it could offer binding resolutions affecting banks and have the power to fine for incompliance.