The "rescue" of the mortgaged is a good idea

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Last week the Government announced that it had reached an agreement with the banks to provide relief to mortgaged families due to the rise in interest rates . Although initially a headline like this may seem like it is bad news, since as soon as interest rates rise a little we are already seeing "bailouts" for those who went into debt beyond their means, if you dig a little into the specific measures you can see that they are not so bad.

Whenever there is relief for groups that have engaged in excessive risk behavior, it gives the impression that incorrect behavior is being encouraged and therefore is not a good idea. But on this occasion there are several factors that make the measurements correct.


What the Government has agreed with the banks
The first thing is to review what has been agreed. It is basically a modifi  India Email List  cation of the Code of Good Practices , whose adherence by banks is voluntary, but compliance is mandatory once they have decided to join it.



What is the French amortization system?
ON THE SALMON BLOG
What is the French amortization system?
These modifications are two: one for the most vulnerable families (with income less than three times the IPREM, , euros per year) and families with somewhat less vulnerability (income less than three and a half times the IPREM, , euros).

The most vulnerable families are allowed to have two years of grace, a reduced interest rate in these years and extend the term of the mortgage up to seven years. It is estimated that , families can benefit from this measure.

Families that meet the second income criterion can benefit from certain improvements if the mortgage payment exceeds % of the income and if the payment has increased by at least %. In this case they can freeze their payment for months , have a reduced interest rate over said period and extend the term up to seven years.

Why the most important thing about your current mortgage and the one you take out are the cancellation and subrogation conditions
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Why the most important thing about your current mortgage and the one you take out are the cancellation and subrogation conditions
In addition, expenses to convert the mortgage from variable to fixed rate will be reduced and commissions for early repayment will also be reduced . An interesting topic because it can make a big difference.

Good for those affected, good for the banks, without public money
The first positive news is clear: these measures are a relief for vulnerable families whose mortgage is becoming difficult. Regardless of whether they were reckless in not foreseeing a rate increase that all the experts announced (since really the mortgages most affected by the increase in installments are those signed in the last five years, due to the French amortization system) the truth is that Normally these types of families have less information .

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It's been four years since the "A Fixed Rate" video and it's still the best viral financial advice ever.
If history tells us that great experts are capable of underestimating market risks (just look at the behavior of banks around the world just before the Great Recession), let alone people with not very large incomes .

On the other hand, the measure benefits the banks, which prefer to have a little less income in the short term than having to keep homes that they do not know how to sell correctly and that is not their main business. The banks, therefore, also benefit from these measures, which are also clear and agreed upon .

And finally there is a third great advantage: there is no talk of putting public money to relieve families. It is simply relief measures in which the Government has acted as a mediator between a lot of families affected but not connected and the banks.