What to do if your mortgage has been triggered in the review

The Government recalls that families can also choose to switch to a fixed rate at no cost or at a “very low” cost There is a Code of Good Practices in which banks undertake to refinance the debt of families in trouble Nearly 8,000 households They applied to restructure their mortgage debt. The bank accepted a third of the cases The sharp rise in variable-rate mortgages is just around the corner for many families. The Euribor index has doubled in just one month. Households that review with the reference month of September will notice, on average, 115 euros more in letters for every 100,000 euros of mortgage. What can a home in trouble do in the face of this rise? The options are basically reduced to three: Reduce other expenses or pull savings. Switch to a fixed-rate loan. Ask the bank for a refinancing of the mortgage to reduce the rise in the installment. The problem with the first option, reducing expenses or pulling savings, is that it is not available to everyone. Wages grow on average four times less than prices and the money saved is concentrated more on high incomes. In many homes, the capacity to deal with unforeseen events is reduced. There are only two other alternatives left. Going to a fixed rate The fixed rate is today the majority choice in signing new mortgages. 73% of financed home purchases choose this modality. It represents a total turnaround in the market because they were practically residual until a few years ago. However, its weight on the total debt accumulated by households is not very large. Families have 520,000 million in mortgages and about 400,000 million is variable rate debt. In other words, the bulk of the mortgage debt is going to be revised upwards. Not all credits are the same. Before the housing bubble burst, mortgage conditions were very good. They were marketed with differentials such as: Euribor + 0.50%. “These credits are not going to suffer as much,” explains Patricia Suárez, president of the ASUFIN association. “But there are mortgages contracted between 2013 and 2015 at a variable rate with much higher spreads and that should have been changed to fixed rates already.” The Government itself recalled this possibility of moving to a fixed rate. “This is not new”, said Nadia Calviño in an interview on TVE. The economic vice president recalled that since the Mortgage Law was modified in 2019 so that citizens could “easily” change from a variable-rate mortgage to a fixed-rate one “at no cost or at a very low cost.” For banks it is now the star product itself, so the offer is wide. Going to fixed, surely, would not mean a great saving with respect to the revision of the variable credit, but it would be a defense against possible new rises in the Euribor. “Our recommendation is to move to a fixed rate. We have been saying it for two years. There are still competitive fixed rates and we must compare with other entities, but we must be careful in this transition,” says Suárez. There are three possibilities, explains the president of ASUFIN: Novation with the same bank. Negotiate with our entity. “In that case, it is possible that they press to increase the client’s relationship,” explains Suárez. Subrogation with another bank that offers us better conditions than the novation of our entity. Cancel and contract a new credit. The first two options are the ones with the lowest associated expenses. Request refinancing The financial sector signed a Code of Good Practices in 2012 that is still in force. This deal involves a debt restructuring for vulnerable families. In order to qualify for this measure, a series of requirements established in the standard must be met. Among them: That it be the habitual residence. That the credit quota exceeds 50% of the family’s income. That the household income does not exceed three times the IPREM indicator. By 2022 this calculation would be around 1,737 euros at most per month of income. That the economic situation has been altered in the previous four years. Since this mechanism was established, 130,000 families have requested to flatten the rise in their bills. About half of them were granted restructuring by banks. “Now what we are going to see is whether it is necessary to reinforce these instruments to support families that may have a difficulty,” Calviño explained without giving more details. In total, last year almost 8,000 new applications were submitted to the bank, a very low figure if we compare its evolution in the past. What has fallen is the acceptance rate: only 30% of the total were approved. The reasons for the denial are diverse, but “mostly it was due to the fact that the applicant did not meet the requirements demanded in the norm”, explains the last report on this Code of Good Practices sent to Congress. We do not yet know what the evolution of requests is this 2022. The drop in acceptances last year may be due to the fact that the criteria are very strict. But neither in the Government nor in the banking sector do they confirm changes in this regard. In the financial sector they point out that “more data is needed”. Still, they say, it is early to draw conclusions about the situation.