Spain's government announces mortgage aid

4th November 2008, Comments 0 comments

New measures will help the lower-income families and the jobless meet mortgage payments.

4 November 2008

MADRID - Spain's government, grappling with soaring unemployment and an economy buffeted by the global credit crunch, announced a plan Monday to help families make mortgage payments and reward businesses that hire.

Prime Minister Jose Luis Rodriguez Zapatero said that as Spain's once-buoyant economy braves hard times, his government will pay special attention to lower-income families and the jobless.

"I am in favour of government intervention when the economy is in serious trouble, especially families," Zapatero told a news conference.

Under the measures announced Monday, the latest in a series of steps to deal with an economy suffering from a collapsed real estate market, unemployed workers will be able to defer half of their monthly mortgage payment, with a limit of EUR 500 for up to two years.

Zapatero said the government will serve as a guarantor of those delayed payments. The plan applies to people with mortgages of EUR 170,000 or less, which is just above the national average, and the government thinks up to 500,000 people will qualify, the prime minister said.

Many Spaniards are suffocating in debt because the vast majority of homeowners here have adjustable-rate mortgages and rates have gone up at least two points in as many years. Many Spaniards have seen their monthly house payments nearly double.

The government will also try to put more money in homeowners' hands each month. Those who, because of the interest they pay on their mortgage, are owed money after filing their income tax returns will see that money factored in to reduce their monthly withholding tax, Zapatero said.

Zapatero also said the government will pay EUR 1,500 a year to companies that hire unemployed people with families to support.

"Without a doubt these measures are going to have a positive impact," Zapatero said.

Spain's economy was once one of Europe's great success stories, posting more than a decade of solid growth. But the construction sector, key to the expansion, has collapsed amid the sharply higher interest rates and a credit crunch, and in just over a year the economy has fallen flat.

Last week the Bank of Spain reported that GDP declined 0.2 percent in the third quarter compared to the second, the first such decrease in 15 years.

Spain also has the highest unemployment rate in the European Union: 11.3 percent by the government's calculations, but 11.9 percent according to the EU's statistical agency, Eurostat.

[AP / Expatica]

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