The Bank of Spain wants assistance to mortgage holders to be limited and temporary.

That’s why, Ángel Estrada, director of financial stability, He asked the government to be “very careful” so the plan he devised banking “Don’t make it too difficult for new loan applicants”. He argued that if the measures are excessively broad, businesses risk making loans more expensive to transfer their costs to new mortgages. “It is crucial that any type of assistance contemplated does not benefit current mortgage holders at the expense of potential new customers,” he insisted.

A “very significant if-if-ever increase” in mortgage defaults cannot be predicted unless the economic scenario deteriorates much more than expected, the senior official said. have been considered “quite cautious” in recent years. In this sense, he stressed that the majority of defaults occurred mainly on loans issued in the last five years and which have a “fairly small” overall weight. He also stressed that the weight of the installments on the mortgagee’s income is generally “quite comfortable”, with the exception of about 10% of cases where it exceeds 50%.

Order of defaults

Defaults do not increase because the middle classes use their savings to face loss of disposable income due to rising inflation, while low-income households reduce their consumption. Along these lines, he remembered that mortgages were the last thing distressed families stopped paying. As noted, households that experience more than 20% decline in income or whose members are unemployed stop paying consumer loans after six to twelve months, basic utility receipts are paid the following year and loan installments only in the second year. housing purchase.

“this mortgage It is the last thing Spanish borrowers stop paying, and it is a strength of our system that should not be abandoned. because it is what gives great solvency to a primary source of finance owned by organizations such as mortgage bonds (debt securities that are sold to investors and have mortgages as the underlying asset), especially in times of turbulence. “Measures must be temporary so that this power of the Spanish banking system is not lost,” he said.

most vulnerable

Estrada initiated these messages during the presentation of the Bank of Spain’s biennial Financial Stability Report. In the document, the auditor points out that the impact of the rise in inflation and interest rates on families and businesses has become “more generalized”, with so far focusing on low-income households and companies in the sectors most affected by the crisis. Pandemic. Thus, 13.8% of households have an excessive financial burden (more than 40% of their income), among those with the lowest incomes exceeding 35%. “It doesn’t mean they will default, but it does mean they are more vulnerable”institution accepted.

In this sense, the Bank of Spain asked banks to make “adequate and timely” provisions to face future losses. Currently, yes, this increasing weakness of its customers has not been reflected in the balance sheets of the sector. At the end of June, there were 84.7 billion euros (54 billion companies, 28 billion households and 2 billion non-bank finance companies) in privately supervised loans in Spain due to high default risks, equivalent to 7% of institutions. their financing to companies and households, however, represents a 9.8% drop from December. Another 45,000 million (about 25,000 million companies and 19,000 million households) have already defaulted, 3.8% of the total and a decrease of 8.1%.