MADRID – The banking sector in Spain is preparing for an increase in mortgage defaults this spring. The projections for 2023 continue on that path, with Euribor expected to continue rising.
Although Euribor fell on Thursday to its lowest level (3.359%) since January after the shock in the US banking system. While the previous day recorded the highest daily increase since June. Based on this, it is estimated that Euribor will reach 4% in June. At least that is the prediction of the Association of Financial Users (Asufin).
Spokesperson Verónica Rodríguez points out that “according to what banking authorities such as the European Central Bank tell us and what is worrying is coming from April”, since “all increases last year were more or less acceptable, but in 2023 the revisions will be an accumulated have an increase”.
Effects are not the same everywhere
The effects will hit the incomes most affected by inflation and also the areas most pressured by house prices, as is the case in the Balearic Islands. For example, the number of foreclosures on the islands in 2014 was 3,112. This figure decreased year after year to 431 in 2021. Last year, however, the first increase in the entire series was recorded with a total of 458 foreclosures, i.e. an increase of 6.3 % while in state terms there was a decrease of 22.3%.
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In the specific case of housing (the global statistics also include plots and other categories), the state average reflects a decrease of 18.6%. Meanwhile, the annual increase in the Balearic Islands reaches 47% (224 in 2021 against 330 in 2022).
On the positive side, most mortgages were taken out in the past year, both at the state level and in the Balearic Islands, have a fixed interest rate. All of these mortgages are “armoured,” Rodríguez points out. Citing the spiral of rising prices unleashed by the volatility of the market. Variable rate mortgages made up 95% of mortgages in Spain 20 years ago, while they only reached 30% last year.
SVB brings new uncertainties
The scenario that could open the bankruptcy of Silicon Valley Bank (SVB) brings new uncertainties. According to Ultima Hora, the explosion of defaults that could happen this year, especially on the variable mortgage side, will not catch banks off guard. In this sense, the president of the entity, José Ignacio Goirigolzarri, points out that “we are prepared for the forecast of greater difficulties because we are the main stakeholders in negotiating and helping our customers to meet their payments .”
Asufin also insists on such an approach. In doing so, they ask banks to “look for alternatives for those consumers who cannot take advantage of the measures included in the update of the Code of Good Practices” (a measure promoted by the government last November).
Less hostile panorama from September
The forecasts of the association of financial users assume a less hostile panorama from September when Euribor should fall to 3.8% to end the year at 3.7%. The Spanish Central Bank, however, expects an increase of up to 4.5%.
The series of foreclosures that can take place until then, they say, can be alleviated by the support measures that have been put on the table by the government. In addition, the profile of the Spanish mortgage holder contributes to a favourable scenario. It is and will remain essentially “a good payer now and in the vast majority of cases in the future”.
However, the European Central Bank seems less optimistic. Today it is holding an emergency meeting in Frankfurt to review the situation of the European banking sector during the financial storm created by the fall of Silicon Valley Bank and the difficult situation that Credit Suisse now finds itself in. The emergency meeting comes a day after another rate hike of half a percentage point.
Message of calm
Christine Lagarde assured that the financial body can guarantee “liquidity” to the markets to avoid financial catastrophe. A message of calm in line with two decisions of particular importance. The first was the injection of €30 billion into the Swiss group by the authorities of that country. The second, a similar act, was performed in the United States, for the First National Bank.