Gonzalo García Andrés, Secretary of State for the Economy, has led the negotiations with the banks to agree on the plan to help mortgaged people in trouble due to the escalation of the Euribor that the Council of Ministers approved this Tuesday.
The announcement of the plan came in extremis, late on Monday.
Agreement is difficult on a matter like this. From the Government we wanted to make the most of the possibilities that the instrument of the code of good practices gives us and the functioning of the mortgage market itself to ensure that these relief measures reach the people who will need them during this time. For us it was very important to raise the income threshold and that it could reach the middle class. It is a complicated issue, because changes in the conditions of the loans have an impact on the provisions and capital requirements of the banks. Wanting to make a measure that favors families had to be prevented from having unwanted effects.
Are you satisfied with the attitude of the bank?
It has been a long process, but the position of the banking associations has been constructive, as well as that of the Bank of Spain. Of course, with the banks defending their interests and the Government trying to reach a result like the one we have obtained. It was worth it.
87 entities adhere to the 2012 code voluntarily. Do you now expect a similar degree?
The measures are reasonable and adequate. In addition, clients will want their entities to be able to offer them these conditions and, therefore, we expect that there will be very high and widespread adherence to the plan.
The Bank of Spain warned of the possible effect of the measures on the flow and price of new credit.
The measures are going to make it less expensive in terms of negotiation to adapt the conditions of the mortgage loans to this situation of interest rates, so we do not think that it will affect the supply of new credit. Likewise, in Spain the degree of competition compares very well with other markets and we have reinforced it, in addition to the fact that the new code for middle classes will not apply to new operations.
Banks also expressed reservations.
The measures will strengthen the strength of the mortgage market. We give a structured and coordinated response, based on best banking practices, that will avoid the problems that we saw very starkly during the financial crisis. When there are payment problems and it is not given adequate and anticipated treatment, it generates social costs, as with foreclosures, but also economic and financial costs. The entities, after that hard experience, I think they also understand it.
What additional provisions will they be forced to make?
A range of estimates has been made. But what increases provisions and affects capital are not the measures themselves, but the effects of the rate hike.
Members of the government’s minority partner have criticized the plan.
Measurements are very powerful. They take full advantage of the framework of our mortgage market to effectively alleviate situations of over-indebtedness and payment difficulties and at the same time preserve the functioning of said market: the value of the guarantee, the culture of payment. In the debate in Parliament on the measures, when they are fully known – and we are going to make an effort to explain them – I think that in the end they will end up understanding that they are the ones we need.
To validate the Royal Decree, are you not afraid of needing parties to the right of the Government?
I find the arguments to oppose these measures difficult. We hope they will have broad support in Parliament.
When do you expect the greatest concentration of restructurings and novations to take place?
The plan will enter into force on January 1 and it would be reasonable for them to focus on the first three quarters of the year. But even if the code for metered classes is temporary, there is enough time for families to request it and therefore it will be a constant flow.
Would it be possible to extend said code beyond two years?
The new code responds to the rise in interest rates which, if we look at historical terms, it is very rare for them to rise so much in such a short time. No forecast at this time points to a new rise in the Euribor of the same amount. If the rate hikes were more intense in those two years, which is not likely, the package we have approved would be effective.
The 2012 Code of Good Practices benefited 62,500 mortgagees until 2021, but for the new plan they estimate one million potential beneficiaries.
Through the Bank of Spain’s financial survey of families, we have reached that figure of one million households that can take advantage of the measures. The relationship between those who can be accepted and those who actually end up being accepted has been an important variable in the negotiation and analysis. Effective enforcement of the 2012 code is relatively low. But out of prudence, we have taken into account the possibility that it could now be a bit higher and have worked with different scenarios.
What figures of final beneficiaries handle?
It is very difficult to come up with a concrete figure. The important thing is to see the universe of households that are covered, that can potentially be accommodated, and also take into account the effect of the measures, which will provide effective relief and are adapted to the circumstances of each type of household.
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Are the measures going to mean a relief of the quotas of the middle classes in the short term, but an increase in the interest burden in the long run?
The debtor will have the option of keeping the installment for 12 months. So that once that period has passed, the increase in the fee can be smoothed out, you can extend the period up to seven years. The interest rate that will be applied to the part of the principal that is not amortized during the maintenance of the installment will be lower than the market rate that would correspond to the review during that period. The important thing is that the measures do not imply an increase in the financial burden compared to what each borrower had agreed to and the extension of the term will be an option. Of course, whenever they leave you money for longer, you pay interest for longer, that’s financial logic and fundamental good practice. The important thing is that we are going to offer this possibility to people who need it and, depending on their rental conditions and preferences, they will decide to pay more during this period or extend the term to clearly smooth out the payments.