The increases in the Euribor and the progressive revision of variable mortgages will raise this year the spending of families destined to purchase a home to 36.6% of their income, which is the highest level since 2011 and will place the effort above the average of the last twenty years, according to Funcas estimates.
These calculations respond to the trend of rises in the Euribor, which has gone from negative rates in just one year to reaching an average of 3.647% in March. The Bank of Spain calculates that by the end of last year 40% of all variable mortgages had already been reviewed and that the rest will be renewed in the first part of this year.
The payment of an average mortgage of 150,000 euros at 25 years has gone from 528 euros in 2021 to rise to 665 euros in 2022. Funcas calculates that this year it will amount to 819 euros, which, according to the average wages in the country, will place the effort six points above that registered at the end of 2019, just before the start of the pandemic.
The percentage of income dedicated to the mortgage will, however, be far from the maximum reached just before the Great Recession of 2008, when it reached 54%. At that time, the real estate puncture caused a collapse in the mortgage firm and also a greater prudence of consumers when assuming expenses.
In its latest Financial Stability Report, the Bank of Spain calculates that rate hikes throughout this year could raise the percentage of households with a high financial burden by almost four points, up to 13.8% of the total, who are the ones who dedicate more than 40% of the income to the payment of the mortgage.
One of the keys to calibrating the financial pressure of families is in the rises in interest rates. The European Central Bank (ECB) raised them to 3.5% in its last review, but the fall of Credit Suisse and doubts about the stability of the financial system have led it to temper the message about future increases.
The sight is now set on inflation, especially core inflation, and on the possible effects of the rise in prices after OPEC’s decision to cut production. A Nomura report predicts that the increases will continue this year to 4.25%.
Another key is employment, which is allowing families to bear the blow. “In a longer term, the key will be in the evolution of employment, the main determinant of the ability to repay loans by families,” says Raymond Torres, the author of the Funcas report.
The impact of increases in the Euribor on household income will vary greatly in each case. Of the 5.7 million loans in force, 56.8%, which are those that are older than five years, will be less affected as they have already overcome the highest interest burden. Of the remaining 2.6 million, the worst prognosis is for almost half, which are those subscribed at a variable rate.
