The Slow Transfer of Rate Increases to Loan Costs: Insights from the Bank of Spain

Despite the drastic increase in the cost of financing and although the Euribor shows signs of stabilizing, the price of credits still has room to rise. The Bank of Spain estimates that the rate increase “has not been fully transferred to the average rates of loan portfolios to households and non-financial corporations” and “in the case of loans for home purchases and credit to companies it reaches 50%”, with “30% being credit to households for other purposes”.

The transfer, slower than at other times of rate increases, especially in mortgages, is due to the strong commercial competition for financing since a war over liabilities has still not been declared despite the fact that foreign and online banking began to remunerate deposits ago. time.

With data shared last week by the deputy governor of the Bank of Spain, Margarita Delgado, while the Euribor climbed from 0 to 4.1% (with data until August), the increase in the interest applied to mortgages was 2, 4 percentage points and 2.3 points in loans to companies.

In the new concession, the TEDR rate (similar to the APR without including commissions) was 3.86% in mortgages compared to 1.38% in December 2021, when the Euribor was negative; in consumption it advances from 6.10 to 8.28% in the period and from 3.37 to 4.96% in companies.

The deposit process is more delayed because the bank lacks liquidity and therefore has no need to capture savings from clients when the demand to obtain credit has fallen abruptly due to its rise in cost.

Until August, only 6% of the rise in rates had been passed on to the demand accounts of individuals (they pay 0.13% for new money) and 15% to those corresponding to companies (0.54% , and in the case of deposits the transfer reaches 81% for corporations (3.28%) and only 60% for individuals (2.33%).