The slowdown in mortgages can be seen in the volume of credit granted to families. Against the general trend, there is an indicator that does grow: consumer credit. This section increased by 3.9% in January of this year if compared with the figures for 2022. The rise is also noticeable in Europe, but the Spanish rebound is 25% above what grows in the average for the area of the euro. The combination of inflation, a weaker household structure and a higher number of variable-rate mortgages are behind the data.

In the first month of the year, consumer loans to households represented €95,651 million, which represents an increase of 3.9% compared to the data from a year ago when they stood at €92,046 million. Between the two numbers, the picture has changed drastically with the start of the war in Ukraine and runaway inflation that led the European Central Bank to make a quick turnaround on interest rate policy.

In the presentation of Caixabank’s results, its executives pointed out that they expected a “slight” fall in consumer credit. It should be borne in mind that Caixabank is the leader in the retail segment in Spain. Sabadell, for its part, considered that it could increase its market share in this consumer segment.  

The focus in this type of loans is now on delinquency, which for the moment seems to be contained. The latest data published by the Bank of Spain show that this indicator continued its downward trend, standing at 3.54% at the end of the year, its lowest level since December 2008. Compared with the general indicator, consumer credit delinquency fell to 5.93%.  

Less disposable income

There are several reasons that point to the increase in consumer credit in Spain compared to other European countries. The rise in inflation, although it is true that it affects the whole of Europe, is more noticeable in a market where the economic structure of the family is weaker, say the experts consulted.  

Another factor that may support this upturn is that the Spanish mortgage market is more heavily weighted towards variable-rate loans than in other countries, although in recent years there has been a change in the trend in mortgages granted by banks. In Spain, and in general in southern Europe, there are more variable rate mortgages.  

The sharp rise in the Euribor in recent months, to close February at 3.54%, has also led to mortgage repayments rising, leaving households with less disposable income. 

In any case, the situation could turn around in the coming months. The latest surveys by the Bank of Spain pointed to a rise in the cost of credit and a closing of the tap on the part of the entities, and the banks already pointed out in their results presentations that they expected a slowdown in mortgages in 2023. However, they noted that consumer credit was one of the segments that could experience a less harsh start to the year.

Original Story: Economia Digital | Marta Garijo 
Photo: Photo by Pablo Rodríguez in FreeImages
Edition and translation: Prime Yield