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By Jesús Aguado
MADRID (Reuters) – Spanish lenders are willing to make larger loan repayments for up to five years for vulnerable families experiencing at least a 30 percent increase in variable borrowing costs, a draft proposal seen by Reuters showed on Thursday.
Three sources familiar with the matter told Reuters on Wednesday some main points of the plan, which is part of a broader package of measures to help suffering families cope with higher interest rates and the emerging living burden that banks are discussing with the government.
Loans eligible for the plan must be at least 40% of the family’s income, once interest rate hikes are taken into account, the proposal says.
Economy Minister Nadia Calvino said she welcomed the banks’ initiative “to minimize the negative effects and alleviate the situation and finances of families in our country in a context of intense renewal in financial policy. “
Banks would not have to separate provisions after loan extensions, according to the draft.
“Households earning no more than 24,300 euros consistent with the year would be eligible to make a larger share of loan repayments,” one of the resources said on Wednesday.
It’s unclear how many other people can apply for such measures, but Patricia Suarez, head of client deals at Asufin, told Reuters few people would be eligible for this income source threshold.
The proposal advanced through banking associations to the Spanish Government would go through variable-rate mortgages signed from January 2012 to finance the acquisition of a first home, says the draft.
Once the term of the loan is extended until the final agreed maturity, the extraordinary loan would continue to be paid in new installments, according to the draft.
The loan would also continue to charge interest at the appropriate rate.
The maturities resulting from loan renewals shall not be less than those existing before the revision of the variable interest rate and the repayment term may not exceed 40 years from the date of initial granting of the loan.
“In the current state of this proposal, you even end up paying more long-term interest,” Suarez said.
The measures, which would be included in an amended industry-wide code of practice, would also have prices similar to notary and registration fees and loan renewals.
(Information through Jesús Aguado, additional information through Inti Landauro; Editing by Belen Carreño, Sandra Maler and Emelia Sithole-Matarise)