Eleven million households have bank debts and of those, five million have mortgages. One million of them are considered to be vulnerable. Given the interest rate shock from 2020, the number of vulnerable households among those in debt will rise from 10% to 14% with a rise of 400 basis points in the price of money. According to the Bank of Spain, the number of mortgaged households that will be eligible to benefit from the Code of Good Practices signed by the Ministry of Economy and the Bank of Spain with the banks will rise to 550,000 households, a “significant” figure.
The impact of the rise in interest rates is greater the lower the income, and the increase in vulnerable households will mainly come from this profile of household economies, as they are unable to bear financial burdens of more than 40% of their income and contribute around 400,000 families with payment problems. These are not only poor households, but also households that spend more than they earn.
It should be borne in mind that up to December, the date on which the supervisor’s financial stability report is based, banks had only passed on 30% of the costs to mortgages and companies, so there is still a long way to go in terms of growth in the financial bill.
Mortgage delinquency rates at financial institutions are at a record low, but the supervisor calls for caution. In addition to helping vulnerable economies, initiatives such as the Code of Good Practices seek to prevent an upturn in delinquency, since seven out of every 10 mortgages at banks are linked to variable rate contracts.