2023-06-12 00:01:29
Inflation causes the purchasing power of citizens to fall. Also, inflation never comes alone. The price of housing and the price of new mortgages and the installments of those who have it at a variable rate have also risen. This has meant that the remaining savings achieved in the pandemic, due to not being able to consume, have dropped a lot. The consequence is that Spaniards resort to consumer loans to be able to continue spending, but above all to get to the end of the month and not miss the holidays.
Data from the Bank of Spain for the month of April show this trend. The outstanding balance amounts to 95,666 million euros. This figure represents an increase of 286 million compared to March and 2,583 million euros compared to the same month of the previous year. The average interest on new loans amounted to 8.07%, the highest percentage since August 2016.
Carmen Herrero, emeritus professor at the University of Alicante and Ivie researcher, points out that family savings during the pandemic were used in many cases to purchase certain goods without resorting to consumer loans. “After the pandemic, there were two types of families: those that kept savings, and those that had spent it when the possibilities of traveling and consuming opened up again,” Herrero points out.
In contrast, the outstanding mortgage balance is falling. In a month it has fallen by 926 million euros and in a year 10,930 million. The main reason for this difference is because it is a long-term and larger loan. The emeritus professor at the University of Alicante explains that given the rise in fees due to the rise in interest, “some of the families that had saved during the pandemic have decided, in many cases, to repay part or all of their mortgage debt , to save the rise in rates in monthly installments.
In fact, Juan Carlos Higueras, PhD in Economics and professor at EAE Business School, assures that consumer loans increase because families do not make it to the end of the month due to inflation and the rise in the Euribor that has caused mortgage payments to rise a lot. “To cover other expenses or, given the difficulty in renewing the conditions of the mortgage, families are covering themselves with consumer loans that have shorter terms, are for smaller amounts, although they are more costly, but are easier to obtain.”
For her part, Elisabet Ruiz-Dortas, a professor at the UOC’s Economics and Business Studies, explains that “people have alternatives for housing, which is to rent and postpone the purchase. But to fix something at home, buy a car, which could be more expensive in a year, or go on vacation, there is no other option”. Herrero adds that the conditions for granting mortgage loans have tightened, which is why the number of such loans has decreased. It is not, however, so complicated to get consumer loans.
As these are easier to obtain, families in this situation prefer to resort to a consumer loan rather than stop making certain expenses
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In addition, after the pandemic, the Spanish are wanting to continue doing things, with the need to enjoy themselves, explains the UOC professor. With the mortgage, she adds, people do more calculations because it is long-term. “When you look at consumer loansJust look at what you pay each month and if you can pay 300 euros per month for a year, does not look at the interests, Ruiz-Dortas points out. And it is that according to he assures, “it is very difficult to say no to a vacation, to a car, to a party…”.
Carmen Herrero adds that families that do not have savings, given the rise in inflation, have two alternatives: tighten their belts (for example, stop going on vacation or making certain expenses), or request a consumer loan. “Since these are easier to obtain than loans, in certain cases families in this situation prefer to resort to a consumer loan rather than stop making certain expenses”insists the Ivie researcher.
In fact, the EAE Business School professor adds that many banks are encouraging consumer credit given the drop in mortgages, in some cases due to the greater risk of default, in others because the decision to purchase a home is postponed due to its high prices and waiting for the Euribor to drop.
Increase in delinquency
Getting into debt with these types of credits, which are more expensive, even if the amount is less, can lead to a time when they cannot meet their payment. Herrero assures that there are risks: “If families borrow more than is reasonable, delinquency can increase significantly”. Something with which Ruiz-Dortas agrees: “The risk is that if they borrow too much, there is a chance that they will not be able to repay that debt. You are going to have to ask for more loans to pay off the loans.”
Juan Carlos Higueras explains that the mortgage is guaranteed by the home, but in the case of consumer loans “they can be difficult to recover if the borrower cannot pay them.” Within consumer loans, the increase in microcredits or express loans must be considered, which usually have a small principal but with very high interest rates compared to other loans. “These types of loans usually come with some type of guarantee and it could happen that a person cannot even pay the interest generated”the teacher points out.
The banks, for the moment, are not concerned about the delinquency rate. In fact, it is still at the lowest levels of 2008. But there has been a slight upturn in the consumer niche, although it is not something striking. Data from the Bank of Spain show that, during the month of March, doubtful debts from financial credit establishments (EFC) they increased by 252 million, up to 2,840 million. also increased the stock of credit, in almost 1,000 million, up to 43,828 million.
The NPL ratio of the EFCs increased in one month from 6.04% to 6.48%. It must be taken into account that not all consumer credit is in the EFC, and that there may be loans from them that are not consumption.
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