Moody’s warns of negative impact on Spanish banks as mortgage loans fall

MADRID, 12 May. (EUROPA PRESS) –

Moody’s has indicated that the fall in the granting of loans for home purchases has a negative impact on the credit quality of Spanish banks, since this type of loan is a “key line of business”.

The rating agency collects the data published last week by the General Council of Notaries, which indicated that the sale of housing in the month of March had fallen by 11.2%, while mortgage loans contracted by 26.4%. , in both cases in year-on-year terms.

“The cooling of the residential mortgage market is negative for the credit of Spanish banks, because it is a key line of business, responsible for 44% of the system’s loan portfolio”, Moody’s analysts have indicated, recalling that the entities they often use mortgages to attract customers and cross-sell other products.

According to the rating agency, although the pressure in the housing market affects both supply and demand, what is affecting it to a greater extent is the “bulk and rapid” increase in borrowing costs.

This has caused the outstanding balance of the Spanish mortgage portfolio to fall in recent months, in parallel with the increase in interest rates for new operations, which reached 3.54% in March, from 1.54% which he registered a year earlier. Early repayments are also taking place, mainly in mortgages contracted with a variable interest rate.

Moody’s has indicated that the fall in the purchasing power of Spanish households due to inflation is also another factor that is reducing the demand for credit. The real wages of Spaniards fell by 5.3%, according to the Organization for Economic Cooperation and Development (OECD), being one of the largest decreases among the 38 member states of the organization.

“We expect the decline in mortgage volumes to persist in the coming months as still-rising interest rates will continue to reduce demand for new loans and increase customers’ willingness to repay existing loans,” Moody’s analysts consider. .

In any case, the low cost of liabilities and the repricing of interest rates on assets will cause interest income (interest margin) of Spanish banks to continue to grow in 2023, with increases of between 20% and 30%. % for the largest entities.