HEALTHPLAN MAGAZINE

The recent increase in interest rates has made home loans in Spain 35 percent more expensive. Despite some expectations that the European Central Bank (ECB) might hold off on raising rates this month due to inflation stabilisation, the ECB decided to increase rates by another 0.25 points on September 14th, marking their tenth consecutive rate hike aimed at bolstering economic recovery.

This has had a significant impact on variable-rate mortgages, which have become notably more expensive for the four million Spanish households holding such loans. On average, monthly mortgage payments have surged by around 35 percent, resulting in a 25-year, 150,000 euro mortgage costing 229 euros per month.

Furthermore, these rate hikes affect various other types of loans, including those for automobiles and household appliances. It's important to note that 5 percent of Spanish households resort to consumer loans to make ends meet, and data from the Bank of Spain shows a sharp increase in such loans in July, reaching levels not seen since 2009.

Given the necessity of paying mortgages, many consumers have had to cut back on other expenses. This task is particularly challenging because the prices of essential goods have risen significantly over the past year. For instance, in August, groceries saw a 10.5 percent increase in cost compared to the previous year, and staple items like olive oil (+52.5 percent), sugar (+42.5 percent), potatoes (+18 percent), pork (+16 percent), and milk, cheese, and eggs (+12 percent) all experienced substantial price hikes.

Fuel costs have also risen, with petrol being 8.6 percent more expensive this summer than the previous year, and diesel prices surging by 13.4 percent. While Spain's Gross Domestic Product (GDP) appears healthier than some other countries, such as Germany, which is expected to end the year with a negative balance, there are concerns that the ECB's rate hikes, intended to combat inflation, may have unintended consequences.

The bottom line is that when consumers allocate more of their income to mortgages and essential expenses, discretionary spending takes a hit. Nonetheless, banks remain confident that economic growth will rebound next year. The ECB's explanation for raising rates is not to provoke a recession but to achieve price stability for those disproportionately affected by price increases, which they refer to as the "privileged."

Source

https://spanishnewstoday.com/mortgage_repayments_increase_in_spain_following_yet_another_rate_hike_2238716-a.html