Households rely on consumer credit more than ever before in Spain
The outstanding amount of debt exceeds 110 billion euros for the first time, after rising by 10% in September, although the ratio to GDP remains at controlled levels
Households in Spain are increasingly relying on consumer credit to cope with the high cost of living, even though inflation has started to ease. In September, consumer credit rose by 10.05%, the biggest increase since February 2020.
Following this rise, the outstanding balance exceeds the 110-billion-euro barrier for the first time in the entire historical series. The last time Spain got close to the margin was in July 2008, amidst the 'great recession', when it exceeded 109 billion euros. That was at a time when banks were much more lax in their lending conditions than they are now.
The figures published this Monday by the Bank of Spain show that, since April 2024, when the 100-billion threshold was exceeded for the first time since 2009, consumer credit has been growing steadily month after month.
In terms relative to GDP, however, household debt remains at contained levels. In the second quarter it fell to 44%, compared with 45.4% in June 2024. In any case, the double-digit rise in September is particularly noteworthy. It coincides with the return to school, which presents a great struggle for many household budgets.
Dropping interest rates
The statistics confirm that banks have become more lax and that people are reaching out to them not only for the usual purchases such as cars or specific household appliances, but also for summer holidays or study fees. This can be attributed to lower interest rates.
In September, the NDER interest rate (which does not include fees) on new consumer loans stood at 6.86% on average, the lowest since July 2022.
In any case, these types of loans are more costly. However, with the Spanish economy showing strong resilience to geopolitical and trade tensions, the default rate on consumer credit remains under control. This is a key factor that allows banks to continue pushing these higher-risk loans. Families, after all, will always prioritise paying essential debts, such as their mortgage, before anything else.
"Geopolitical instability and economic uncertainty do not seem to have dented credit demand. This closed the year 2024 at 97%, so the current levels indicate an activity that has remained on the rise despite the ups and downs of the markets and the macroeconomic outlook," a recent report says.
In this environment, some experts warn of the risk of resorting to credits when it's not essentially needed. "Credit should be used for investments or one-off needs, not to maintain the standard of living. Financing current expenses generates a spiral that reduces the capacity to save up and increases the risk of over-indebtedness," debt management experts state.
According to a recent Asnef study on the behaviour of Spaniards, credits are mostly taken out for household goods and electrical appliances (41%), followed by electronics (34%). "Another thing to highlight is the boom in credits for education and training, which stands at 10%," the study says. Credits for holidays and studies are gaining weight due to the smaller amount that has to be repaid.
Experts also highlight that energy prices continue to be one of the main concerns of Spaniards, which explains the increase in the financing of solar panels (4%) and energy-saving equipment (6%). They add that "the automotive industry deserves special mention, as financing plays an essential role when purchasing a vehicle. In fact, it is estimated that 80% of car sales transactions in Spain are carried out through financing services".
