The bench sets foot on the wall. The ringing of interventionist bells in the mortgage market resounds in a sector that constantly feels like a kind of punching ball of the government. This time, the plans that put them in the spotlight come from the flank of United We Can, which has proposed limit the rise in variable-rate mortgages for vulnerable families who are suffering the most from the escalation of the Euribor. A measure that in the banking and financial field is considered directly unfeasible.
Industry sources consulted by La Información defend that the clauses of individual private contracts cannot be modified by decree and that entities already renegotiate loans with debtors experiencing economic difficulties. It is our “day to day”, they insist. Without going into detail about the UP proposal, the entities’ legal services agree that the measure does not have “legal reserve” and, if carried out, it would imply important problems with regard to the modification of the contracts in force. “It would generate great legal insecurity,” they say.
Without having analyzed it in depth, the entities do not rush to express an official position, but in the banks an issue is already being dealt with that puts them, once again, “in the trigger”, as denounced by sources in the sector who They complain that proposals like this one end up generating “reputational problems”, because no one wants their mortgage to go up. In any case, the sources consulted emphasize that the Government cannot limit prices in the private sector, since initiatives of this type would go against European regulations and the National Commission of Markets and Competition (CNMC)and that is the premise from which they start to oppose the approach of United We Can.
In any case, in a preliminary approach to the purple group’s bill, in the sector they confirm that “It would even cause second-round consequences”, since the banks would be forced to provision part of the credits due to the risk of non-payment, which would reduce the benefits and, therefore, the collection that the Government intends with the new tax. In addition, they recall that the new EBA regulations, which came into force a little over a year ago and are applied by the European Central Bank, require entities to transfer all their costs to new credits.
From the banking sector they even predict that the measure would harm the vulnerable groups themselves, defined by a series of income scales, to which the entities would stop granting credits due to the aforementioned risks of non-payment. In the sector they are convinced, however, that it is an “electoralist measure” that “will not go ahead”, but they emphasize that, in the end, it is a “reputational” issue that they are forced to cope, when it is the State that must focus its efforts on protecting vulnerable groups with its own resources.
On this occasion, the sector has the support of the socialist wing of the Government. Starting with the president himself, Pedro Sánchez, who has been quick to publicly reject the proposal of his partners to limit increases in mortgages to protect the most vulnerable against rising prices. “The ceilings on mortgages are not allowed in the European Union treaties”, affirmed the head of the Executive, while defending the tightening of the monetary policy of the European Central Bank to control inflation, even if it implies an increase in the monthly payments of families that have contracted a variable-rate mortgage.
The words of the president -which serve as an argument for the banking sector- have provoked the immediate reaction of the Minister of Social Rights and general secretary of Podemos, Ione Herb, which has directly described them as “excuses”, assuring that it is not true that Europe prohibits limiting mortgage increases and that Spanish legislation has a code of good practice that establishes that, in the event of mortgage debt restructuring , entities undertake to implement a limitation on the applicable interest rate. Belarra has been blunt: “This has already happened with the cap on gas, the rise in the SMI or the tax on banks and electricity companies. The problem is that people cannot wait months for us to convince the PSOE, risking massive defaults as happened in 2012.”
From Podemos we have proposed putting a limit on the rise in variable-rate mortgages to protect families against increases of up to 200 euros per month. We hear the same excuses as always for not carrying it out. The EU won’t let us.
— Ione Belarra (@ionebelarra) September 14, 2022
Precisely, the First Vice President and Minister of Economic Affairs, Nadia Calviño, aligned with Sánchez, recalled this Wednesday during the control session to the Government in the Congress of Deputies some of the measures to protect families and companies in these circumstances, such as the Mortgage lawwhich facilitates the change from variable rate mortgages to fixed rate, or the implementation of the CCode of Good Practices in the financial sector to promote debt write-offs and restructuring. The vice president also pointed out that the Euribor is at levels “much lower than those that have been reached at other times” and that both families and companies are today in a “better financial position”.
More forceful were shown in the Ministry of Finance. Sources from the department headed by María Jesús Montero assured that the Government is studying different measures to alleviate the financial burden that citizens must assume as a result of the rise in interest rates, but that they do not share the proposal to cap mortgages. Speaking to the media, Montero recalled that in mortgage matters there is “a regulated framework of mandatory compliance” and that “this framework must always be respected.” In any case, he pointed out that the government has already approved measures “to alleviate everyone’s burden” and stressed the need for “all measures to go in the direction of lowering inflation.”
New crack in the coalition
The rejection of the Socialists, in any case, has caused a new crack in the coalition. Minister Belarra has expressed her discomfort through her social networks, backed by the spokesperson for the UP parliamentary group, Pablo Echenique, who has asked the PSOE to “accept something that is fair and balanced.” Sources from the purple formation recall that “it is not the first time” that they have to “convince” their government partners and they hope to gather enough support to pressure Sánchez among the investiture partners (collect sees the proposal with good eyes, although it asks that it be generalized and not only for vulnerable families, and ERC has proposed the creation of a “rescue fund) and even among the unions (UGT already put on the table the need to set up an Esquerra-style public fund).
But sources in the sector insist that the limitation of mortgage increases stipulated in the contracts signed between entities and individuals “not legally viable”. “The only thing the Government can do is urge banking entities to renegotiate the conditions of mortgage loans, but in practice that is already being done and also, by the Executive, would be a toast to the sun“, affirm other sources in the financial field who emphasize that the Mortgage Law already contemplates that if the Euribor goes off and there are families at risk of default, the bank must propose alternatives such as paying less monthly installment and extending the loan or a modification of the conditions.
Asufin He has also expressed his doubts about the effectiveness of the Podemos proposal, considering that the requirements are “very restrictive” and will leave many families out. From the association of financial users they predict that the same thing will happen as with the Government’s Covid moratoriums, whose high demand for access requirements forced banks to offer sectoral moratoriums, “which were the ones that worked.” They defend that the Executive legislate in favor of the most vulnerable in the current context of economic deterioration, but they do not believe that the solution can come from this type of measure. Instead, the association urges the banks themselves to streamline exchange operations, novations and subrogations, from variable mortgages to competitive fixed rates.