Young people protest against the problems of access to housing in Barcelona. EFE
Bank of Spain warns of collapse of young families owning their own homes

Bank of Spain warns of collapse of young families owning their own homes

Among the under 35s, the data shows 45% of this group could take out a loan to buy a house two decades ago. Now, the number barely exceeds 20%

Clara Alba


Wednesday, 10 July 2024, 21:53

Opciones para compartir

People in Spain are taking out fewer mortgages, which shows an improvement in accumulated debt but reflects a steep fall in real estate assets, the Bank of Spain has warned.

This can, in turn, lead to financial vulnerability in the long term. The Bank of Spain also pointed out the gap between older and younger homeowners is widening, given the ageing of Spain's population, which in recent years has been compounded by the difficulty for young people to become independent.

While the percentage of households with debt associated with the main residence has remained relatively stable at around 28% since 2014 for the population as a whole, its evolution by age group has been varied, falling in the youngest "considerably", as detailed by the Bank of Spain in its latest report on the financial situation of households and businesses.

In 2022, 40% of households under 45 years of age had a mortgage loan for their main home, ten points less than the 50% at the end of the first decade of the 2000s. The difference is even greater among the under 35s, where the Bank of Spain's graphs show 45% of this group could take out a loan to buy a house two decades ago. Now, they barely exceed 20%.

Mortgages and credit

This situation has worsened in the past few years of the inflationary cycle in which the ECB's interest rate hikes have abruptly increased the cost of mortgage loans, both those newly created and the outstanding balance linked to variable interest rates. For the latter, however, the Bank of Spain maintains a good outlook following the recent drop in the Euribor. It considers that two out of every four mortgages linked to the Euribor, 26%, will become cheaper by 2024.

The Bank of Spain also warned of some deterioration in household credit quality. Between September 2023 and March 2024, loans to households classified as problematic increased by 5.3%, due to the increase in credit on special watch, which is how banks classify loans that begin to show the first alarms, although they have not yet defaulted. In total, they now account for 65% of problem loans, which are growing despite the slight fall in doubtful loans (those that are not paid).

The problem loan ratio increased in March by six-tenths of a point compared with the third quarter, to 9.7%, levels similar to those at the end of 2019, before the pandemic. The increase was due to the rebound in special surveillance lending, which rose to 6.3% (1.2 points above pre-pandemic levels), while the doubtful loans ratio remained at 3.3% (1.2 points below pre-pandemic levels).

The Bank of Spain pointed out the favourable reduction in household indebtedness thanks to economic activity and strength of the labour market, which have continued to be key to the rise in incomes.

This increase in income, coupled with a decrease in spending, has led to an increase in the savings rate to 14.2%, above its historical average. Savings which, according to data from the Bank of Spain, are moving out of treasury bills and into time deposits.

Reporta un error en esta noticia

* Campos obligatorios