Consumer credit escalates while banks turn off the tap for companies and mortgages

The European Central Bank (ECB) is gradually achieving the first of its objectives to fight inflation, that is, cutting off the flow of credit to companies and households to depress consumption and, ultimately, lower prices. Financing for the business community has been declining for months, coinciding with the rate increase that the Eurobank began in July 2022, and companies are beginning to notice it in their daily lives..

The rising cost of money and the tightening of the conditions applied by entities translated in August into a year-on-year decrease of 4.4% in the financing received by Spanish companies, to 919,145 million euros, according to data published yesterday by the Bank of Spain. Twelve months before, the amount reached 961,135 million, but since then the figure has not stopped decreasing.

It is the result of the combination between a restrictive policy on the part of the entities and a lower demand on the part of the companies themselves, which have retreated due to the increase in financing costs in recent months.. In this sense, the association of small and medium-sized companies, Cepyme, warned yesterday that the average interest rate on new bank loans for that segment has gone from 1.62% to 4.45% in one year and that , in this context, SMEs today access a quarter less bank financing than before the pandemic.

The decrease can be seen in all aspects collected by the Spanish banking supervisor. The outstanding balance of traditional bank loans decreased in August to 462,140 million euros, 24,845 million less than in the same month of the previous year, or 5.1% in percentage terms. Debt values fell to 129,144 million euros, 7% less year-on-year, and foreign loans fell 2.2%, to 327,860 million.

Mortgages and consumption

But the credit restriction is not limited only to companies. Families are also noticing the progressive closure of access to credit by banks and entities and they notice it especially in housing financing..

At a general level, the credit granted to this segment fell by 2.5% in August 2023 compared to the same month in 2022, to 685,663 million euros. In volume, the comparison subtracts 17,658 million euros, although a good part of this decrease falls on mortgage credit. The granting of financing for the purchase of housing has been sinking since the beginning of the year in parallel with the growth of the Euribor, which rose to 4.15% at the end of September.

A portion of potential home buyers have withdrawn from the market; some, faced with the impossibility of assuming the new prices, and others waiting for conditions to improve and they can obtain lower rates. In this context, household mortgage loans (which represent the majority of their total debt) stood at 499,876 million euros in August 2023, which is 18,081 million less than a year before and 1,709 million less than the last month.

However, unlike what happens with companies and mortgages, the hose not only does not narrow but is increasingly longer when it comes to consumer credit.. This type of loans, with higher average interests, grew by 2.4% in August compared to the same month last year. The balance in this field reaches 97,152 million euros and shows one of the alternatives that households are resorting to to weather the impact of inflation on disposable income and their purchasing power..