Mortgage holders in Spain struggling with rising interest rates

Around 120,000 Spanish families will be unable to pay their mortgages

Currently there are approximately 60,000 households in Spain that are unable to meet their monthly mortgage repayments and it is estimated that this number could double to around 120,000 over the next 6 to 8 months according to Manuel Pardos, the president of the Association of Users of Banks and Building Societies (Adicae).

According to reports in the Spanish press last week, Pardos said that nearly 4 million mortgage holders, especially those who took out their mortgage between 2000 and 2008, are having real difficulties in meeting their monthly payments following recent rises in the Euribor. The latest rise in interest rates yesterday saw the Euribor rise to 4.25%.

The president of Adicae affirmed that the current situation is dramatic because there are a large number of families and households at risk of losing their homes due to defaulting on mortgage payments.

Pardos explained that people defaulting on their mortgage payments had risen above the 0.

3% recorded in 2007 and now stood at 1.5% and could even reach 3% by the end of this year.

According Pardos those most affected were immigrants and families with children between 30 and 40 years old who took out their mortgages when interest rates were much lower.

The president of Adicae said that he considered the measures proposed by the government to tackle this issue as insufficient and said that the idea of extending the terms of mortgages, recently proposed by the Minister for the Economy Pedro Solbes, as ridiculous.

Pardos added that the government was not offering solutions and urged the executive to reform laws governing mortgages and pass a law on over-borrowing, something which was kept back in the last legislature.

Adicae has put forward the idea that the government could subsidize part of the mortgage ‘in the most dramatic cases’ and it has also proposed that financial institutions adopt similar measures.

Pardos urged that a satisfactory solution be found for banks. He also stated that it was not in their interests to accumulate a large stock of properties.

See: Mortgages in Spain # Mortgages for non-residents in Spain