Sumar presented a non-legal proposal for the Economic Commission of the Congress of Deputies to debate the implementation of a regulated fixed-rate mortgage for the purchase of a primary residence. The parliamentary group emphasizes that the objective is to “put an end to the fallacious transfer of mortgage risk management from banks to households”.
“This transfer is possible thanks to poor mortgage regulation which allows a credit marketing policy for the purchase of housing which gives priority to variable rate mortgage loans over fixed rate mortgage loans, which results in higher costs. high and financial instability for housing,” explains Sumar in his book. proposal. In addition, he highlights “a greater negative impact of restrictive monetary policies on Spanish families during inflationary periods, like the one we have just suffered”.
Sumar also believes that the mortgage model has “negative consequences which also extend to credit institutions which lose their reputation with this policy and can increase their default rate”.
The parliamentary group highlights the predominance of variable rate mortgages in Spain, which until 2015 represented 90%, although after the bursting of the bubble, fixed or mixed rate mortgages gained importance and represent six out of ten mortgage contracts. However, “the predictable and gradual decline in Euribor in the coming months promises to restore vigor to variable rate mortgage loans”.
“Data from the Bank of Spain and the Spanish Mortgage Association reveal that in June 2022, before the start of the increase in interest rates by the European Central Bank, more than 70% of the 626.680 million euros of the total balance of outstanding mortgage loans (50% of GDP) were subject to a variable interest rate, which places Spain in an abnormal position and vulnerable to any inflationary process,” explains Sumar.
Lower Euribor
As a result of the drop in official interest rates from the European Central Bank (ECB) due to moderating inflation and stagnant activity in Germany and France, the Euribor fell to 2.7 % in recent days, a minimum never seen before. since autumn 2022. This benchmark index for the majority of mortgages and loans in our country and in the entire Eurozone exceeded 4% a year ago.
Precisely, in September 2023, the Euribor was on average at 4.149%, where it reached the ceiling of this cycle of monetary austerity. Since then, its decline has been very pronounced and, over the last six months, it has made variable rate mortgages subject to the annual review cheaper. For several months, the loan maturities, updated every six months, have also been reduced. Likewise, the cost of new mortgages has fallen, to the point that some experts warn that this is a factor that encourages demand for housing purchases and that there is a risk of an overheating of a market real estate whose prices are already skyrocketing.
The example of the electricity market
Sumar’s proposal would follow the example of regulated tariffs in the electricity market “where consumers can choose between market tariffs, subject to variations, and regulated tariffs which offer greater stability and predictability”.
The idea is to create “a regulated fixed-rate mortgage loan” which would be “accompanied by a minimum associated risk profile that the borrower would have to respect to access it and which would guarantee their solvency to meet the repayment of the mortgage loan” . “Of course, this regulated mortgage does not limit the rest of the mortgage offers that credit institutions wish to offer, but it sets a reference that they would be obliged to offer in any debt transaction for the purchase of a main residence . In addition, current mortgage holders will have the option to convert their mortgage into a new regulated mortgage,” explains the training.
Thus, mortgaged people would have to meet a series of conditions, such as having a stable employment relationship and a maximum limit of mortgage payment plus remaining interest on debts in relation to the mortgagee’s income of 40%.
The fixed rate of the regulated mortgage would be that of 10-year Treasury bills. “This equivalence is due to the fact that the risk that an entity assumes when granting a mortgage loan is zero, since it benefits from a double guarantee.” On the one hand, “the value of the guarantee provided exceeds the amount of the mortgage loan by 20%”. On the other hand, “the mortgage guarantee is personal in Spain, that is, the mortgagee responds with all his income and property to meet the payment of the debt and not only with the value of the mortgaged housing, since he there is no dacion.” in payment except in cases of extreme vulnerability.
Additionally, the maximum term of the mortgage would be 30 years, with a maximum credit limit on the value of the home of 80%.
