The splash of cold water in the form of interest rate increases of up to 4.5% thrown by the ECB on the economy has already lowered the temperature of credit. According to the latest data from the Bank of Spain, in the first eight months of the year, loans were signed to buy a home or finance a business project for 230,232 million euros, 19% less than in the same period of 2022.
In the month of August alone, the credit allocated to companies was 19,521 million, 20% less than a year before, and that directed to mortgages was 3,630 million, 13% lower. In both cases, they are the lowest figures in two years and contrast with what happened with another type of loan, which is the one with the most risk and is usually associated with lower levels of solvency: consumer loans. Its volume, 2,347 million in August, is not very different from that of recent months.
These figures outline a new trend in Spain, in a scenario of high rates and a foreseeable economic slowdown. “It is not that credit has stopped flowing, but that there is less demand, especially after a 2022 in which a lot of savings were disbursed after the covid,” point out the banking sources consulted. “Credit has stabilized in a scenario of uncertainty,” they add.
Among the different categories of credit, the one that falls the most is that corresponding to companies, which subscribed loans for 193,166 million until August, 19% less than in the same period of the previous year, amid divergent signals about their state of health.
Although the large Ibex listed companies continued to reap high profits in the first half, the INE has been recording year-on-year declines in business turnover since April. The association of small and medium-sized businesses, Cepyme, complains that bank financing has fallen by a quarter, while its cost has skyrocketed. He estimates that interest on loans has gone from 1.62% to 4.45% in one year.
There are more nuances in the decline in business credit. “With the ICO credit lines renewed or available, there are companies that have already recovered from the pandemic and continue to have resources without the need for new financing,” explains Leopoldo Torralba, economist at Arcano Partners. Added to this is another factor: the “caution” of many companies regarding rate increases.
In the business sphere, the only thing that is clear is that the trend of rate increases is still far from affecting everyone equally. The latest report from the Business Margins Observatory prepared by the Government and the Bank of Spain shows that some sectors such as agri-food improve their margins, compared to the worse performance of consumption and industry.
Regarding mortgages, in the first eight months of 2023, loans for 37,066 million euros have been subscribed, 17% less than a year before. “We are at an inflection point. Demand is contracting due to the ECB increases, the climate of uncertainty and the increase in the cost of living,” says Leyre López, analyst at the Spanish Mortgage Association (AHE). “Hiring is above before the pandemic and contrasts with a 2022 of record levels, so it is now at positive and reasonable levels,” she adds.
When presenting the financial results until September on Thursday, the CEO of Bankinter, Dolores Dancausa, not only reported that the bank had reduced the contracting of mortgages by 17%, but also that the amortizations made by individuals were had doubled. This circumstance explains why household debt has fallen below 50% of GDP for the first time in two decades. “At an aggregate level, families are now very solvent,” thanks in part to the good employment situation, Torralba points out.
The loans that seem to go against the current are consumer loans, with 20,893 million euros until August, 8% more. “The correction in these loans is being less intense,” explains Marta Alberni, Afi consultant. “Although the favorable tone remains, the reality is that little by little the granting of these credits slows down.” In June, Alberni points out, there was an increase in consumer loans, but it responded to the seasonal effect of the holidays and, what is more significant, it was less intense than a year before. “The rise in rates, greater caution and the volume of savings that individuals maintain a priori mean that there is not as much need for consumer loans,” she adds.
