The supervisor led by José Luis Escrivá is finalising a new framework that excludes the most vulnerable groups from the tightening of mortgages. The measure aims to prevent further strain on access to housing.
The Bank of Spain is preparing a shift in its mortgage policy. Rather than implementing a widespread tightening, the agency is considering excluding first-time homebuyers, particularly young people and households with limited incomes, from the new restrictions. The proposal, which will be ready after the summer, aims to balance financial stability with access to housing.
A Selective Tightening to Include Everyone
The International Monetary Fund has long been urging the Bank of Spain to strengthen mortgage granting criteria to prevent risks. However, the supervisor is aware that applying the same rules to everyone could have an undesirable effect: closing the door on those who already find it difficult to buy a home.
Currently, existing standards limit the mortgage to 80% of the appraised value, the monthly payment to one third of income, and the repayment term until retirement age. If these limits were tightened without nuance, many applicants would see their loans denied.
A blanket restriction could pose a double blow for those who already find it hard to buy: more stringent savings requirements and, at the same time, higher rents.
Therefore, the Bank of Spain is analysing which profiles should be exempt. The idea is that the tightening does not affect those seeking their first primary residence, but rather focuses on second or third homes and investors.
Young People and First Homes: The Major Beneficiaries
The most highlighted group is that of young people. The average age of emancipation in Spain exceeds 30 years, the highest in the European Union, and gross salaries barely reach 1,372 euros per month, according to the INE. Gathering 20% of the property value, plus taxes and fees, becomes nearly impossible if banks raise their requirements.
The governor of the Bank of Spain, José Luis Escrivá, has already hinted at this direction in his appearance in Congress. He stated that they are "evaluating whether it can really have undesirable effects" and that "we must ensure that we are not creating adverse effects".
The supervisor also distinguishes between the purchase of a first primary residence and second or third homes. The restrictions would be modulated with much less rigor in the former case.
What It Means for the Market and Buyers' Wallets
The financial sector already anticipates that a harsher mortgage restriction would have a chain impact. On one hand, housing prices in sales would drop because demand would decrease as financing becomes scarce. On the other hand, the homeownership rate, which has already fallen to 72% according to the latest financial stability report from the supervisor, would continue to decline. And most importantly: rental prices would skyrocket, as potential buyers would be forced to remain in the rental market, which is already very tight.
Mariano Lasarte, partner in the Financial Sector at KPMG Spain, warns that if measures are excessive, there could be an "initial halt in sales" and a "gradual reduction in prices over a period of two to three years". In his view, the Bank of Spain will be prudent, precisely to avoid destabilising the market.
Ricard Garriga, co-founder of Trioteca, quantifies the potential increase: if mortgages in Spain were to match the European average, with rates exceeding 4% compared to the current average of less than 3%, the monthly payment on a loan of 200,000 euros would rise by about 100 euros per month. "If it's already complex to buy today, it would be an even bigger problem," summarises the expert.
The regulator's proposal is expected to be ready after the summer; however, it will not be implemented immediately, as the Bank of Spain believes that, at present, the market is not out of control: mortgages are not being granted at 100% of the appraised value — as was the case during the bubble until 2008 — nor is there family indebtedness that smells of default risk. The ultimate goal is to have a framework that balances financial stability and access to housing for those who need it most.
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