Bank of Spain confirms rapid credit contraction and entities anticipate more difficult conditions in the latter part of the year
Stricter conditions and much stricter criteria when granting a mortgage. It is the scenario in which those who started buying a house in the third quarter of the year have found themselves, as shown by the latest survey of bank loans by the Bank of Spain. A document in which the entities make it clear that, in view of the last part of the year, there will be an even greater tightening in the last part of the year.
It is true that the situation is not exclusive to Spain, as the survey results show how this tightening is being generalized in the European Union following the start of the first interest rate hikes by the ECB.
In Spain, in fact, the sector had already anticipated the possible contraction in supply in the previous survey, which corresponds to the second quarter, but the Bank of Spain confirms that they would have done so “with a slightly greater intensity than they had then expected “. In fact, they confirm that shrinking supply in the mortgage segment is the highest in a quarter since 2008.
This evolution is said to have occurred mainly as a result of an increase in the risks experienced by the entities, given the deterioration of the economic outlook and the housing market. According to the survey, the deterioration of borrowers’ solvency or higher financing costs for banks would also affect this situation, albeit to a lesser extent than the previous reasons.
“In line with this evolution of the offer, the percentage of rejected credit applications would have increased,” the Bank of Spain indicates.
As for the terms of the loans, and in full controversy over the increase in fees following the recent escalation of the Euribor, they were tightened again between July and September. This is the second consecutive quarter that this has happened, which has translated into an increase in interest rates.
However, the margin used would still be moderate as the strong competition that persists in this market segment would have fully passed on this rate increase to the cost of credits.
“According to the perception of financial entities, the demand for funds for the purchase of houses would have decreased between July and September, in line with what was expected in the previous round, breaking the trend of continuous increases registered in this segment . during the past six quarters,” they urge the regulator.
This evolution would in turn be a result of the rise in interest rates, lower consumer confidence and, to a lesser extent, greater use of equity.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
