Sharp Decline in Credit Availability as Interest Rates Rise and Banks Tighten Financial Conditions

The rise in interest rates, the tightening of financial conditions by the banks and the consequent fall in demand for credit continues to reduce the granting to families and companies, whose credit balance has decreased by 59,390 million in one year. In the homes fell 2.55%while among the companies The accumulated collapse in the last year has been more pronounced, 4,33%.

This was confirmed yesterday by the Bank of Spain in its latest financial accounts report, which set the reduction in financing to companies at 41,557 million euros, to place the total portfolio at 918,783 million. 2,346 less that a month ago.

Likewise, the volume of the families’ credit portfolio fell by 2.55% in the last 12 months (17,833 million less), although in the last 30 days it remained stable and barely fell 0.08%, to 685,134 million. The mortgages was once again the category that suffered the most, with a decrease of 3.46% year-on-year, which would be more than 400 million, up to 499,464 million euros. Specifically, the mortgage portfolio of financial entities was at its lowest level since May 2006 in the month of September, given the continuous repayments being made by mortgage holders, which already exceed the amounts of the new operations. The outstanding balance of loans granted to households for the purchase of housing suffered a decrease of 319 million compared to August data.

In the opposite direction, the Consumer credit Yes, he returned to the positive path and increased by 2.3% in one year, around 200 million compared to the month of August, reaching 97,342 million.

This same week, the financial director of the Bank of Spain, Angel Gavilanwarned of the risk of an “increase in risk aversion” on the part of the banks, which will generate a “further tightening of financing costs and will reduce activity”when households and companies postpone or reduce their consumption or investment plans for “precautionary reasons” in the face of the progressive decrease in the liquidity reserves of companies and households, which “decrease due to the sustained increase in financial costs.”

In the same sense, and as estimated by the last Bank Loan Survey of the Bank of Spain corresponding to the third quarter of the year, the final reasons for this downward evolution would be the recent increases in interest rates in the euro zone, which have continued making the offer more expensive for the sixth consecutive quarter and that have also contributed to cooling demand, which has plummeted by more than 13,000 million in the case of mortgages and is close to 21,000 million among companies. In the latter case, the fall in demand has to do with worse prospects and its consequent lower investments.