Bank of Spain Governor sees no need to extend mortgage support

MADRID (Reuters) – Bank of Spain Governor Pablo Hernandez de Cos on Monday said he did not see the need at the moment for banks to potentially extend mortgage relief measures for vulnerable households given the limited use from citizens so far.

Last week, Spain’s Prime Minister Pedro Sanchez said the new coalition government was planning to extend the annual income threshold to qualify for mortgage relief support to 38,000 euros ($41,283) as part of a set of measures to help families cope with higher borrowing costs.

“In this central scenario in which the economy is still slowing down but could recover again in 2024, we see no need to amend the code of good practice,” De Cos said at a financial event held in Madrid.

Under an amended industry-wide code of good practice, Spain’s banks are now expected to provide mortgage support for vulnerable families earning less than 25,200 euros per year.

Additionally, middle-class families with an income of less than 29,400 euros and who were at risk of defaulting would also receive additional protection.

Around three-quarters of the Spanish population are homeowners. They are among the most exposed to a rise in interest rates, as around 70% of their more than 4 million outstanding mortgage loans are bearing variable rates.

The average cost of a mortgage in Spain has risen to 3.84% as of August, compared to 2.03% in the same month in 2022.

In November 2022, the Spanish government approved mortgage relief support for more than one million vulnerable households, but so far only 42,000 requests have been made in the first seven months of 2023, according to data from the Bank of Spain.

“We have observed that the use is still limited, our assessment of this fact is that the economy has been going reasonably well. We have all been surprised by the strength of the labour market,” De Cos said.