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Date Published: 09/05/2023

Spain proposes mortgage aid scheme that caused UK house prices to skyrocket

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The government in Spain will guarantee 20% of the mortgage of low income under 35s

Spain proposes mortgage aid scheme that caused UK house prices to skyrocket

In response to the current “housing emergency,” the government will today (Tuesday May 9) approve a measure to guarantee 20% of the mortgage of first time buyers in Spain under the age of 35. The scheme will be available to younger people who earn less than 37,800 euros per year and those with dependent children.

“We are going to put housing at the centre of our priorities,” President Pedro Sánchez said after announcing the line of guarantees through the Official Credit Institute (ICO), a measure he stressed would enable 50,000 people get a foot on the Spanish property ladder.

But while it sounds good in theory, similar measures applied in other European countries have wreaked havoc on the real estate sector.

England launched its ‘Help to buy’ programme back in 2013 whereby the state guaranteed mortgages of up to 95% for lower income families. And although the scheme did indeed help around 340,000 families to buy a home, it also pushed up housing prices.

As a result, ‘Help to buy’ was scrapped in March last year.

“The government’s homebuyer aid scheme has pushed up house prices in England and has failed to offer good value for money for taxpayers,” warned a report by the British House of Lords.

The document added that “with the current scheme, prices are inflated above the value of the aid, especially in areas where it is most needed.”

Rather than offering a helping hand, in London and other in-demand areas, the value of the aid was simply tacked onto the selling price.

Here in Spain, the guarantees don’t have widespread support either, although the government has assured that it is carefully analysing the average price of houses in different regions to avoid the same pitfalls.

Requirements to qualify for guarantees

To be eligible for these ICO guarantees, the mortgage applicant must:

Be under 35 years of age.
Have an annual income of less than 37,800 euros. In the case of there being two applicants, the income mustn’t exceed 75,600 euros in total.
Be in a family with dependent children. There is no age limit to request these guarantees, although the income still must not exceed 37,800 euros. This is an amount that will be increased in the case of single-parent families.

In other news: Spanish race slammed for giving female runners kitchen appliances as prizes

Image: Freepik

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