The bucket of cold water in the form of interest rate hikes up to 4.5% set by the ECB on the economy has already lowered the credit temperature. 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, credit allocated to companies was 19,521 million, 20% less than a year earlier, and that allocated to mortgages was 3,630 million, 13% lower. They are in both cases the lowest figures in two years and contrast with what has happened with another type of loan, which is the one with the most risk and is usually associated with lower levels of solvency: the consumer loan. Its volume, of 2,347 million in August, is not very different from that of recent months.
These figures show a new trend in Spain, in a scenario of high interest rates and a predictable economic slowdown. “It’s not that credit has stopped flowing, but that there is less demand, especially after a 2022 in which many savings were spent after the covid”, point out the banking sources consulted. “Credit has stabilized in a scenario of uncertainty”, they add.
Among the various credit categories, the one that falls the most is that corresponding to companies, which signed loans for 193,166 million until August, 19% less than in the same period of the previous year, amid divergent signals about your state of health.
Despite the fact that the large Ibex listed companies continued to obtain high profits during the first semester, the INE has been registering year-on-year declines in business turnover since April. The employers’ association for small and medium-sized enterprises, Cepyme, complains that bank financing has fallen to a quarter, while the cost has risen sharply. He calculates that interest on loans has gone from 1.62% to 4.45% in one year.
There are more nuances to the downturn in business credit. “With renewed or available ICO credit lines, 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 Arcà Partners. Another factor is added to this: the “caution” of many companies regarding rate hikes.
In the business field, the only thing that is clear is that the trend of rate hikes is still far from affecting everyone in the same way. The latest report of the Observatory of Business Margins drawn up by the Spanish Government and the Bank of Spain shows that some sectors such as agri-food are improving margins, in contrast to the worst performance of consumption and industry.
In terms of mortgages, in the first eight months of 2023, loans were taken out for 37,066 million euros, 17% less than a year earlier. “We are at a turning point. Demand is shrinking due to the increases in the ECB, the climate of uncertainty and the increase in the cost of living”, points out Leyre López, analyst at the Spanish Mortgage Association (AHE). “Hiring is above pre-pandemic and contrasts with record levels in 2022, so it is now at positive and reasonable levels,” he adds.
When she presented the financial results to September on Thursday, Bankinter CEO Dolores Dancausa not only reported that the bank had reduced mortgage underwriting by 17%, but also that repayments made by individuals had doubled . This circumstance explains why household debt has fallen below 50% of GDP for the first time in two decades. “On an aggregate scale, families are now very solvent”, thanks in part to the good timing of employment, Torralba points out.
The loans that seem to be going against the flow are consumer loans, with 20,893 million euros up to August, 8% more. “The correction in these loans is being less intense”, explains Marta Alberni, Afi consultant. “Although the favorable tone is maintained, the reality is that the granting of these credits is gradually slowing down”. In June, Alberni notes, there was an increase in consumer loans, but it responded to the seasonal effect of the holidays and, more significantly, it was less intense than a year earlier. “The increase in interest rates, the fact of being more cautious and the volume of savings that individuals maintain a priori mean that there is not so much need for consumer loans”, he adds.
