Spanish banks are worsening the conditions for granting mortgages at a higher rate than expected, either due to the increase in the cost of the loan or due to the demands placed on potential clients, as can be seen in the quarterly survey of bank loans carried out by the Bank of Spain between March 22 and April 6.
In the first quarter of the year, 90% of the banks detected a decline in the demand for mortgages, which is the highest percentage among the large economies of the euro zone. According to ECB data, the results in Spain exceed those registered in France, at 80%, and in Germany, at 75%, where, on the other hand, these contraction rates have been appreciating since previous quarters.
At a European level, the conclusion is that the path of tightening of loans is already the most pronounced since 2011 and that "the limitations on granting loans have been higher than expected in the previous quarter and point to a persistent weakening in the dynamics ", according to the ECB.
Spanish banks report in the survey carried out at the national level that in the first quarter loan conditions for both individuals and companies continued to worsen, and they anticipate that access to financing will worsen in the second quarter. The tightening, says the Bank of Spain, is "generalized" and has been taking place for four quarters.
These results are known just one day before the ECB meeting in May, in which the institution will study a possible rise in interest rates beyond the current 3.5%. The level of loan impairment is one of the factors analyzed to gauge whether the measures already adopted have reached the real economy and whether monetary policy should be eased.
In Spain, the results show a "more intense" tightening than anticipated and a decrease in supply as a result of the "increased risks perceived by financial institutions" and "a lower tolerance for them, fundamentally linked to the deterioration of the macroeconomic prospects and the solvency of the borrowers", says the Bank of Spain.
A significant factor is the percentage of rejected applications, which increased in all modalities. To this is added a "very intense" increase in costs, which results in higher margins in the banking business.
Demand, he indicates, has fallen "especially sharply" in loans to families for home purchase. "Financial entities already anticipated a downward trend in applications three months ago, although the forecasts were less pessimistic than what the results for the first quarter of the year have now reflected," says the Bank of Spain.
The banks recognize an improvement in profitability, although with some nuance, since the liquidity program launched by the ECB during the pandemic is about to end, which will force them to seek more financing in the markets and, foreseeably, to remunerate deposits.
