The rise in inflation and the increase in the Euribor, the index to which most mortgages are referenced, is making a break for homes. According to the Financial Survey of households and companies published by the Bank of Spain, a middle-class family already allocates close to 50% of their income to cover their essential expenses -food, supplies and housing- and that percentage has risen 60% of them also have a variable rate mortgage.
This has meant that the percentage of households that cannot cover their basic expenses with their income has registered increases since the start of the year, compared to 2022. Specifically, 9% of households will not even be able to cover their basic expenses with their income. . In addition, the percentage of households in a “particularly fragile” situation, defined as those that cannot cover essential expenses for more than a month, would exceed 4%. This percentage is substantially higher in families with the lowest income level, where it would reach 17%.
The regulator also points out that despite the fact that interest rates have risen by 400 basis points, mortgages have become less expensive than expected. On the other hand, the increase in the Euribor and inflation has caused lower disposable income, the household savings rate at the beginning of 2023 was above the historical average, the wealth of families has captured and has been reduced its debt ratio. This is possible thanks to the resistance of employment, notes the regulatory body.
On the contrary, delinquency has still not arrived despite this less favorable environment, since in March it had a fall of 22.5% in the interannual rate. However, loans under special surveillance -those at risk of defaulting- have rebounded since the end of last year, with growth of 18% year-on-year in March, which shows a deterioration in the credit quality of loans granted to homes.
The cost of financing for companies rises
The cost of new financing also rose in the first quarter of the year, this time in the same proportion in figures similar to those carried out for the rest of the year, although with greater intensity for large companies, since loans have risen more above a million.
Corporate turnover continued to rise at a high rate, although the increase in the average cost of debt would begin to slow down the rise in earnings after interest. At the same time, the corporate debt ratio continued to fall, although the financial burden picked up slightly. In this context, the percentage of vulnerable companies decreased in the first quarter of 2023 and returned to pre-pandemic levels.
Non-financial corporations’ non-performing loans continued to decline, with a year-on-year drop of 14.9% in March, 10 percentage points more than a year earlier. The setbacks have been more pronounced sectors in those most affected by the pandemic (16.9%), whose payment capacity has improved, as economic activity recovered after the lifting of mobility restrictions.
