It has been one year since the initiative star of the Government to tackle the problem of access to housing for young people came to light and its results were far from being successful. At the end of September, banks have signed only 7,887 mortgages with the public guarantee of the ICO (Official Credit Institute), which is equivalent to 196 million euros, or 7.8% of all the money available for this plan, which totals up to 2,500 million euros. There are two main reasons behind the failure of this measure: demanding requirements, which not everyone can meet, and a bureaucratically complex process that requires the mortgage to be signed first and the guarantee requested afterward, placing 100% of the risk, initially, on the bank.
This line of guarantees is intended for those under 35 years of age who must meet a series of criteria such as earning no more than 37,500 gross euros per year, not owning a home, or ensuring that the property they wish to acquire does not exceed certain price limits depending on the cities. In the Community of Madrid, for instance, the cap is set at 325,000 euros, while in Catalonia, Navarra, or the Basque Country, it stands at 300,000 euros. In the Balearic Islands or Aragon, this limit is 275,000 euros. The ICO line is also targeted at families with dependent minors, where there is no age limit and a slightly higher salary is permitted, among other requirements. This aid must be processed by the banking entities themselves, which highlight its “bureaucratic complexity” and a formal defect that makes it less appealing in comparison to other public programs promoted by various autonomous communities, which prove to be swifter in processing requests. “It is, by far, the most complicated program and the one that works the worst,” asserts one of the participating entities. This assessment is widespread among several banks across the nation, all of which are enrolled in the ICO guarantee program.
The general sentiment in the banking sector suggests frustration with the initiative. “We are talking about an initiative with very rigid and changing processes that require a plethora of technological developments and are complicated for the citizen,” explains another national bank source to EL MUNDO. The sector recognizes that it is “a shame” that this line of guarantees is not having a more significant impact, especially considering that the typical profile of those applying for these mortgages usually consists of “young people with a good income, who consistently pay their installments, but lack the capacity to save” 20% of the amount of the home to pay upfront, along with taxes. Banks commonly finance 80% of the property value, with the possibility of even extending this to 100% with guarantees from family members or acquaintances.
Beyond the bureaucratic issues, there is also a challenge concerning timing in the design of these public guarantees. Unlike regional programs, banks must temporarily assume additional risk when signing these mortgages. As the sector explains, “The ICO endorses once the operation is formalized, having gone through a notary and with the money in the client’s account.” This poses a risk for the banks as they have to issue the mortgage at 100% without the assurance of a timely ICO guarantee. Moreover, it is acknowledged that banks often take precautions by pre-verifying that the applicants meet the guarantee’s requirements. “We verify with the ICO data meticulously and we map everything,” comments a banking source, illustrating the level of scrutiny involved—examining income fluctuations and various other criteria—before they can confidently approve a 100% mortgage anticipating state support with a 20% guarantee.
“What they haven’t accounted for in this process is that many banks are reluctant to take on that risk and human error could lead to not thoroughly reviewing the seven required documents for these guarantees,” sources in the sector remark.
THE FIGURES
The ICO claims it is unaware of the dissatisfaction voiced by banking entities and is hopeful that the guarantee program will gradually pick up “speed.” The initiative is deemed positive by various stakeholders, particularly considering the social dilemma in Spain surrounding housing access, where alternatives to renting are scarce, and prices continue to escalate. Banking institutions began participating in this plan back in August of last year, with full activation achieved by November, as confirmed by the public body.
So far, just over 5,600 young individuals and around 2,230 families have benefited from this line of guarantees nationwide, with Andalusia leading the charge, accounting for nearly 2,270 operations, while Valencia follows with an additional 1,138. The Government has earmarked 2,500 million euros for the ICO within a national plan that is set to renew annually until this limit is reached. In August alone, 800 mortgages were signed under this scheme. Conversely, the latest data from the INE (National Statistics Institute) shows that 57,299 mortgages were signed in July, marking the highest figure for this fiscal year, against a backdrop of a boom in the real estate sector in Spain, where a total of 369,527 loans were formalized—24% more than the previous year.
Among the notable plans is one launched by the Community of Madrid. Since the program’s inception in 2022, 5,067 young people from the region have benefitted, with 3,400 mortgages granted thus far. Over this period, Madrid has allocated 86 million euros specifically for guaranteeing up to 20% of properties priced at or below 390,000 euros. Recently, the Community of Madrid has also taken the initiative to extend the age limit from 40 to 50 years in light of the escalating challenges posed by rising prices.
Andalusia announced just weeks ago plans to expand its guarantee program, allowing access to housing for young people, after supporting 2,100 individuals through a collaborative effort with eight banking entities over the past two years and with a funding reserve of up to 45 million euros. They too are increasing the age limit and enhancing the percentage backed with public funds from 15% to 20%.
Catalonia, on the other hand, has recently introduced a new lending model which has been positively received. The plan involves directly lending 20% of the total home price (up to a maximum of 50,000 euros) to the young applicant, while the bank covers the remaining 80%. These loans are interest-free and need not be repaid until the mortgage is cleared, with a grace period of 30 years and a repayment plan set over five years. Additionally, homes securing this loan will be classified as VPO (officially protected housing), maintaining price limits upon resale. To implement this measure, the Generalitat has allocated 500 million euros over the next five years, available to young individuals aged up to 35 earning below 80,963 euros gross per annum.
Despite the challenges faced, these programs are a glimmer of hope for many young people striving to gain a foothold in the housing market amid spiraling costs and rigid financial structures.