A regulated mortgage, with completely transparent requirements and conditions, to which anyone who meets those requirements can qualify. That is the idea that Sumar presented this Friday in Congress. It is a financial product that entities should obligatorily offer, in a similar way as happens with the regulated rate for all electricity or gas customers, and with a “competitive” fixed interest compared to variable rates.
The reason, according to Yolanda Díaz’s training, is that Spain has “deficient mortgage regulation.” As a result, the commercialization of credits by banks “makes the variable rate mortgage prevail over the fixed rate mortgage, which translates into higher costs and financial instability for households.” This is demonstrated, according to the text presented this Friday, “in the predominance of variable rate mortgages in the Spanish mortgage market, unlike other large European economies.”
Now that official interest rates are falling again, and with it the Euribor, Sumar believes that banks will take advantage of this to sell more mortgages with changing rates. This “places Spain in an anomalous and vulnerable position in the face of any generalized inflationary process that translates into a restrictive monetary policy response” like the one we have just experienced. In recent years, an average variable mortgage in Spain it became more expensive by about 300 euros per monthalthough the quotas have been loosening for months now.
That is why the proposal points to a fixed rate credit that is based on the 10-year Spanish bond, although with an APR (annual equivalent rate, which measures the real cost of the operation) not less than 1% in the event that This will go down a lot. This choice, explains a person who has participated in the definition of the proposal, is due to the fact that this bond “tends to be placed” below variable interest rates during periods of price stability. This is what happens most of the time and the situation we are heading towards, according to Sumar’s analysis. As the new regulated mortgage would be compatible with other products offered by banks, this would make it “competitive” with the offer of loans with mobile rates. And if the entities have others at a lower invariable rate, clients could study them and take advantage of them.
Another advantage that the government’s minority partners see in the financial product they have devised is that it would be totally transparent. Currently, they recall, “the risk profile required for each mortgage offer is unknown, which means that the borrower cannot choose or negotiate, but simply accepts the conditions that are given to him.” In this case, anyone who went to a branch would know that they are entitled to that mortgage if they meet the required solvency profile.
What would be the requirements to request it? Sumar proposes that the borrower have “a stable employment relationship” and that the “maximum limit of the mortgage payment plus the rest of the interest on debts with respect to the mortgagee’s income” does not exceed 40%. That, they point out in the training, is a standard measure used by banks, which usually set that limit “between 35% and 40%.”
In addition, the mortgage would have a maximum term of 360 months (30 years) and would serve to cover a maximum of 80% of the value of the home. The amortization system could be French (the most common in Spain) or German (with decreasing installments) and no opening or cancellation fees would be paid. The idea is that anyone who meets the expected requirements and already has a mortgage could switch to this one.
