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Mortgage payment freeze
Over 35 Spanish credit institutions have signed an agreement with state-owned lender Instituto de Crédito Oficial (ICO) allowing for a freeze on home-loan payments, ICO Chairman Aurelio Martínez announced.
The government has made a 6- billion euro line of credit available to ICO, which will allow households to delay paying up to 50 per cent of their monthly mortgage payments this year and next, up to a maximum limit per month.
Unemployment in Spain has soared in recent months as economic activity plummeted, making it increasingly difficult for a growing number of households to meet their monthly home-loan payments. The jobless rate shot up to 13.9 per cent in the final quarter of last year when some 827,000 homes found themselves with all of Mortgage payment freeze their wage earners out of a job. The European Commission forecasts that Spanish unemployment could jump to a high of 18.7 per cent as the country suffers its worst recession in half a century.
The banks that have joined the ICO scheme include leading lenders such as Santander, BBVA, Caja Madrid and La Caixa. The ICO credit line is aimed at households most at risk and covers mortgages of up to 170,000 euros contracted before the start of September last year, and where there has so far been no default on payments. Bank default rates have shot up to levels close to 3 per cent due to the slowdown, which was marked by a slump in the housing market. These rates are higher for lenders that are most exposed to the property sector.