The debt of Spanish households is reduced by 2% and their wealth grows by 6.1% despite the loss of weight of deposits
The wealth of Spanish families resists, despite the rise in prices and increases in interest rates. According to the financial accounts published this Tuesday by the Bank of Spain, households reduced their debt volume by 2.02% in the second quarter of 2023, at the same time that net financial wealth grew by 6.1% in an interannual rate to reach 2.05 trillion euros, despite the loss of deposits.
The difference between the assets – that is, cash, stocks, deposits, etc. – and the debts of families and non-profit institutions serving households (NPISH) widened by 6.1 in the second quarter % compared to the same period in 2022, thus accelerating its growth compared to the start of the year, in which the increase had been 2.9%. Specifically, family assets increased by 3.9% to 2.81 trillion euros, thanks especially to their positive revaluation, but also due to the acquisition of new financial products, especially through the purchase of debt and the participation in funds and investment.
For their part, deposits lost weight—2 percentage points—among the set of instruments used by households to safeguard their savings, although they continue to be the majority option, accumulating 38% of assets.. In particular, they concentrated 1.06 trillion euros, compared to the 1.07 trillion they reached in the second quarter of 2022. This is followed by shares in capital, shares in investment funds and insurance and pension funds, which respectively represent 31%, 15% and 12% of the total.
The decline in deposits is framed in a context of rising prices and rising interest rates. The tightening of monetary policy by the European Central Bank, which has raised the main financing rate to 4.5%, has redoubled the pressure on the pockets of families with variable rate mortgages. In just over a year, the organization led by Christine Lagarde has undertaken nine consecutive increases of between 0.75 and 0.25 points. Each increase of 0.25 points represents on average, for a 25-year mortgage loan of 150,000 euros with a differential of one point over the Euribor, an increase of 31 euros in the monthly payment.
However, the rate increases have not boosted the profitability of deposits, or at least not in the same proportion, as the governor of the Bank of Spain, Pablo Hernández de Cos, acknowledged this Monday at a financial meeting organized by Expansión and KPMG. Hernández de Cos pointed out that the increase in the Euribor “has only been partially transferred” to the average cost of retail deposits. In fact, the low profitability of these traditional instruments prompted many investors to look for alternative avenues, as was evident in the 'fever' for treasury bills experienced at the beginning of the year.
Despite the increase, the weight of families' financial assets over GDP fell 10.6 percentage points to a ratio of 199.5%, due to the expansion of the Spanish economy. The National Institute of Statistics (INE) revised the GDP for the second quarter upwards by one tenth at the end of September, pointing out that national production increased by 0.5% between April and June. According to these data, the pre-pandemic GDP level recovered already in the third quarter of last year, six months earlier than previous data indicated.
Debt down
According to data from the Bank of Spain, at the same time that their assets increased, households also reduced their debt. In particular, the volume decreased from 717.1 billion euros in June 2022 to 703,200 in the same month of 2023, which represents a slight interannual decrease of 2.02%.. The drop in terms of GDP has been more pronounced. The household debt ratio decreased in the second quarter to 49.9%, compared to the 55.6% it reached a year earlier.
Similarly, companies also reduced their debt by 2.49% for the fourth consecutive quarter, to 939,000 million euros, compared to the 963,000 million they accumulated in the second quarter of 2022. Consequently, the debt ratio of the companies non-financial corporations went from 74.8% of GDP in June 2022 to 66.6% in mid-2023. As a whole, the consolidated debt of companies and households stood at 1.64 trillion euros in the second quarter, 2.3% less than in the same period of 2022.. In terms of GDP, the debt ratio has decreased in the last year from 130.4% to 116.5%.