Interest rate hikes have already created a two-speed housing market, in which unexpected price increases and the proliferation of cash purchases coexist with the progressive worsening of the situation of the most vulnerable. One in seven households faces a financial burden of more than 40% of income, and 42,800 mortgagees have so far applied for the aid agreed between the bank and the central government. The two trends are compatible, as demonstrated by the Bank of Spain's latest financial stability report.
The director general of financial stability, regulation and resolution of the institution, Ángel Estrada, used the word "resilience" yesterday to describe the behavior of households after rate hikes. They continue to save, pay off their mortgages, meet the monthly payments and, when compared, show a better performance than that of the public administration, which needs "a fiscal consolidation program sustained over time" to square the accounts
However, elements of concern are beginning to appear. At the moment, "the path to improvement in the economic situation that households perceived until July would have been cut short, according to the most recent qualitative data", the report says.
Added to this is the forecast that 14.6% of households, or one in seven, will face a financial burden of more than 40% of their income. They are 4.2 points more than what was collected in the previous report, from April, and this reflects the increase in the Euribor. The pressure is concentrated on the middle and lower classes, says Estrada.
One of the solutions is to take advantage of the aid of the code of good practices of the bank in force since 2012, extended since the beginning of the year to incomes below 29,400 euros. The measures include grace periods and refinancing, but their scope is limited at the moment, according to data shown yesterday.
The mortgagees who have applied for help have a debt of 5,367 million euros, which is equivalent to 127,785 euros on average. It is a record that surpasses the almost 3,000 million registered between 2014 and 2016, but the cause is, according to the Bank of Spain, the fact that the number of potential beneficiaries is now greater. About 2,500 million would be explained in this way, he says.
The problem lies in the fact that it is not so easy to meet the requirements, and this is limiting the scope of the measures. 40% of requests do not meet the eligibility criteria and, of those that do, only around 4,800 have been successful.
The level of enforcement is very low when compared to rates of more than 50% between 2014 and 2016, but Estrada asks for patience before jumping to conclusions. "The analysis period has still been short, there has not been time to analyze the impact of the measure", he says.
The Bank of Spain calculates that 30% of mortgages are still pending some upward revision. About 70% of the loans are at variable rates, and the translation of the Euribor is currently 234 basis points, meaning that there is pressure to add to it. The average cost of loans is 3.4%.
This dynamic contrasts with the increase in cash house purchases and price increases. If home sales fall by 15% in the second quarter and new mortgage credit falls by 26%, it is because "the situation has arisen that more homes have been sold without a mortgage than with a mortgage", says the report .
The surprise is, moreover, in the fact that house prices have risen by 3.6% during the second quarter, when "it was slowing down". We are analyzing the reasons to confirm if it is a one-time event that will be corrected", says Estrada. One of the possible explanations lies in the greater volume of new housing and the increase in construction costs. If so, it is an indication of a "housing supply shortage".
