Lending starts 2024 with the brakes on. Lending by financial institutions to households fell by 2.4% year on year to €679.183 billion, while the decline in lending to non-financial corporations was somewhat milder at €922.960 billion, 1.4% less than in January 2023. From one period to the next, interest rates in the eurozone have risen by 200 basis points, from 2.5% at the beginning of last year to the 4.5% set by the European Central Bank (ECB) in September, leading to an increase in the cost of financing.

Faced with higher borrowing costs and rising inflation, the granting of loans was reduced by more than €16.361 billion in the case of families and by €12.736 billion in the case of companies. This decline was also observed on a monthly basis, albeit at a more moderate pace. Household borrowing fell by €2.757 billion, 0.4% less than in December, while business borrowing rose by €24 million.

These data were recorded in the midst of the moderation experienced by the twelve-month Euribor, the index to which most mortgages in Spain are referenced, which closed January at 3.609%, its third consecutive monthly fall. In the same month of 2023 it stood at 3.337%. Although far from the highs of 4.1% recorded last summer, the rise in interest rates has caused a slowdown in lending activity in recent months, especially compared to the second half of last year.

The rise in house prices and the use of savings to repay mortgages, which have risen sharply since they were granted free of charge, have caused the outstanding balance of household mortgage loans to continue to fall, to €494.793 billion, down 3%. This is the lowest figure since 2006, when it fell below the €500 billion mark, according to data published by the Bank of Spain. Nevertheless, the amount that families allocate to their homes continues to account for the majority of their debt, at around 73%.

The moderation in the volume of loans earmarked for housing contrasts with consumer financing, which rose by 3.5% to €98.821 billion. At the same time, the balance of bank loans to enterprises fell by 4.4% to €453.641 billion. On the other hand, debt securities remained above 134 billion, while foreign loans rose by 2.2% year-on-year to 335.242 billion.

Original Story: La Información
Edition and translation: Prime Yield