The Minister of Economy and Competitiveness, Luis de Guindos, announced this week in Parliament a series of measures to improve the functioning of the mortgage market in Spain, and protect those particularly vulnerable as a result of the crisis.
The announcement was made during the minister’s speech to defend the amendments to the bill on urgent measures to strengthen the protection of mortgage borrowers.
The reforms will be presented as amendments during parliamentary proceedings of the bill and, in principle, will affect the Mortgage Law, the Law on Mortgage Market Regulation and the Civil Procedure Law, plus additional measures on financial prudence and the improvement of the Code of Good Practice which the Government launched in March 2012.
These changes are intended to mitigate the effects of the crisis for those families who can not afford their mortgage due to economic circumstances which have arisen. De Guindos stressed that “situations of default or arrears are a distinct minority in our country” and that the vast majority of the Spanish are coping with the monthly payment of their mortgage “despite the difficult economic climate we live in”.
One of the goals De Guindos announced on the Government website, La Moncloa, is to balance the position of the parties involved in foreclosure proceedings. To this end, the default interest that credit institutions may demand is to be limited to three times the legal interest rate (now at 4%), “to avoid exorbitant growth of debt and enable debtors to afford to pay.” This measure will apply to the default interest accrued since the entry into force of the law and, therefore, will affect new mortgages and also those currently entering a default situation.