The Euribor exceeds 3.5% at the end of February and already drowns about 15% of mortgaged families, according to a calculation by the Bank of Spain. The index with respect to which the installments of loans to buy homes in the euro area are calculated climbs to a maximum not seen since December 2008 due to the rises in the official interest rates of the European Central Bank (ECB).
The interests that drown families and the record profit of the bank open the debate on the ceiling on mortgages
Families that update their mortgage at a variable interest rate in the coming weeks will go from paying around 534 euros per month to around 830 euros, 3,000 euros more per year, for the average assumption that the INE includes for a loan of 150,000 euros at 25 years, with a differential of 1% over the Euribor.
The blow is direct in these cases, since in February 2022 the Euribor was trading negative, at -0.335%. But families that sign a mortgage today, or that change it from variable to fixed, also suffer from this increase in financing, as the Government has tried to favor with measures that, however, have been scarce.
This rise in the Euribor, of almost 4 percentage points in one year, causes mortgaged families with problems to meet the monthly installments of their banks to have gone from approximately 10% to 15% since the ECB began to increase the interest rates in July, according to the calculation of the Bank of Spain.
This percentage of households with a “high net financial burden”, according to the definition of the institution, would be slightly more than 35% of indebted families with less income, and 25% of the next income bracket, according to the same exercise. In the case of the richest households, only 3% would be drowned.
Economic theory considers a “high” indebtedness to be that which exceeds a third of the family income. Above this limit, the risks of non-payments grow. Something common, on the other hand, in the housing rental market in large cities.
More rate hikes
The Bank of Spain uses in its calculation an increase in official interest rates of 4 percentage points. For now, the ECB has raised them 3 points, from 0% to 3%, and has announced that it will raise them another 0.5 points on March 16, and that it will continue on that path in the following months. This scenario is the one that exactly includes the Euribor, which trades according to these expectations.
Rate hikes are the main tool with which the ECB is fighting inflation. A strategy that assumes the risk of critically damaging (mainly through the Euribor) the consumption capacity of families, already damaged by inflation itself, and also the investment capacity of companies, until generating an economic recession.
Margarita Delgado, the deputy governor of the Bank of Spain, admitted last week that “the appetite for new credit is low, encouraged by an environment of rising cost of financing.” And she acknowledged that “there is an increase in the proportion of households that anticipate difficulties in meeting mortgage payments.”
The monetary policy strategy of fighting inflation by attacking the demand of families and the investment capacity of companies ignored at first that most of the price crisis was explained by energy. A market on which the ECB cannot act. Now, it is also ignoring the growth of profits and company margins due to the passage of the increase in costs to sales prices, and its impact on inflation, while wages barely improve.
Pablo Echenique, spokesman for United We Can in Congress, has been one of the first politicians to react to the rise in the Euribor, and has stressed that it shows the need for a measure in this regard, since mortgages “soon are going to become priceless for many families”.
The ‘purple’ proposal involves setting the differential for variable mortgages at 0.1%, since, in Echenique’s opinion, the Code of Good Practices agreed between banks and the Government “is not working”.