Spain extends mortgage payments moratorium

9th February 2009, Comments 0 comments

Unemployed homeowners will be able to defer up to half of their monthly mortgage payments of maximum EUR 500 for three years instead of two.

MADRID – Spain's socialist government announced Friday it had extended a mortgage moratorium for out-of-work homeowners in a bid to stem foreclosures in the crisis-hit country.

Jobless homeowners will now be able to defer up to half of their monthly mortgage payments up to a maximum of EUR 500 for three years instead of the two years planned when the measure was unveiled in November.

Deputy Prime Minister Maria Teresa de la Vega said those benefiting from the scheme would have 15 years instead of 10 years to pay back the deferred amount once the initial three-year moratorium period had expired.

The government will underwrite the deferred payments.

The plan applies only to people with mortgages of EUR 170,000 or less, which is just above the national average.

When Prime Minister Jose Luis Rodriguez Zapatero unveiled the measure in November he estimated that the mortgage moratorium could apply to up to 500,000 households.

The plan is part of a series of measures aimed at helping the Spanish economy deal with the fallout of the collapse of a real estate boom which has pushed the country to the brink of recession and driven up unemployment to the highest rate in the 27-nation European Union.

Spain's unemployment rate has risen each quarter since it dipped to 7.95 percent in the second quarter of 2007, its lowest level since 1978, to hit 13.91 percent during the last three months of 2008.

Leading Spanish bank Santander reported Thursday that its loan arrears as a percentage of total lending rose to 2.04 percent in the fourth quarter from 0.95 percent a year ago due to Spain's sharp economic contraction.

In January, the government slashed its forecast for the Spanish economy, the fifth-largest in Europe, to a contraction of 1.6 percent this year from the growth of 1.0 percent previously forecast.

[AFP / Expatica]

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