The Bank of Spain has reported an improvement in the financial situation of households and companies in the country. However, it reveals that to date the cost of bank loans and their requirements have not stopped growing. This translates into more and more applicants for monetary loans and fewer mortgages to buy a house.
In this line, it has predicted that mortgage revisions will start to decrease from next March in the case of annual revision contracts that are linked to the twelve-month Euribor. Despite this, the accumulated increase throughout the "monetary tightening cycle" would still be notable.
Loans to acquire a home have become more expensive by up to 4%. At the same time, the criteria have been tightened and the number of mortgages signed has decreased.
According to the Report on the Financial Situation of Households and Companies, regarding the second half of 2023, the cost of all loans has grown considerably from July 2022 to the present. Specifically, the ones that have become more expensive are consumer loans, followed by those requested by individual entrepreneurs.
In this line, about 20% of Spanish households requested loans in the first and last quarter of last year 2023, while around 17% did so in the intermediate months. Most of them were destined for consumer products, discarding homes and vehicles.
According to the Bank of Spain, economic growth has generated employment and has allowed the advancement of wage and business income. While the tightening of the monetary policy of the European Central Bank (ECB) has continued to cause "an increase in the cost of financing" and a "weakening" of loans.
If market expectations are met, indebted companies and households may experience "some reduction in expenses associated with debt service", although interest rates "will remain at levels significantly higher" than in 2021, when it began to skyrocket.
The Bank of Spain moves in two scenarios: that of moderate progress, where the assets of families and companies would improve; while in adverse scenarios their financial situation could deteriorate.
In this line, it points out that the demand for credit decreased in the second half of 2023 and that the trend will probably continue at the beginning of this year, especially in the case of housing. In addition, requests for loans to the self-employed and non-profit institutions have also decreased. Despite the fact that consumer credit demands continue.
The weakness of loans for the acquisition of housing has remained stable in Spain, compared to the average of the European Union. The Risk Information Center (CIR) has pointed out that this weakness is widespread in the different income levels.
However, consumer credits (which do not include homes or vehicles) and which are granted for free disposal "have grown in a generalized way, but more intensely in households located in areas with medium and high incomes".
In this sense, it points out that "the expansion comes from the generalized increase in the number of new borrowers, which has been less intense in low-income areas. While in the last and middle, the demand for consumer credit has grown less in low-income areas. In addition, the average level of the amount requested has also decreased.
Family income, inflation and savings
Labor income has boosted family income in Spain throughout the third quarter of 2023. At this point, despite inflation, remuneration has grown by 6%. The Bank of Spain has thus highlighted the "increasing contribution of the group of workers of foreign nationality".
Meanwhile, it adds "the strong rebound in consumer spending" compared to the strength of nominal income (which does not take into account expenses and inflation). Although the salary of Spaniards grew, inflation and the increase in expenses caused savings to decrease, although it continued to be above its historical average.
