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Earlier this week, Bank of Spain Governor Pablo Hernandez de Cos released a statement saying he doesn’t perceive a necessity for banks to consider extending mortgage relief measures for vulnerable households, as there has been limited uptake by citizens. This follows Prime Minister Pedro Sanchez’s recent announcement that the coalition government is looking to raise the annual income threshold for mortgage relief support to 38,000 euros ($41,283) to assist families in dealing with increased borrowing expenses. Although the Spanish government granted mortgage relief support to over a million vulnerable households in November 2022, only 42,000 requests have been submitted in the first seven months of 2023, according to Bank of Spain data. De Cos mentioned that they have noticed the utilization is still restricted, and their interpretation is that the economy has been performing reasonably well. De Cos mentioned at a financial event in Madrid that, in the current scenario where the economy is slowing down but may recover in 2024, there’s no requirement to modify the code of good practice. As per the revised industry-wide code, Spanish banks are now anticipated to offer mortgage assistance to vulnerable families earning below 25,200 euros annually. Furthermore, middle-class households earning below 29,400 euros and facing the risk of default would receive extra safeguards. Approximately 75% of Spain’s population consists of homeowners, and they are particularly vulnerable to interest rate increases, given that over 70% of their 4 million-plus outstanding mortgage loans are tied to variable rates. As of August, the average mortgage cost in Spain has increased to 3.84%, compared to 2.03% in the same month last year. In conclusion, the Spanish governor highlighted the observation that the limitations in loan utilization may be a sign that the economy has demonstrated reasonable performance. This insight underscores the complexity of economic dynamics and suggests a nuanced perspective on the factors influencing overall economic well-being.
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