Spanish households and companies will begin to see relief in their contributions starting with the review in March of this year, according to the Bank of Spain. In its Report on the Financial Situation of Households and Companies, published this Wednesday, the entity considers “complete” the transmission of monetary policy and interest rates to the real economy. Therefore, it will cost less for households and businesses to pay their liabilities in 2024.

Thus, the report reveals that the higher reference interest rates for variable rate loans “would be practically complete”, so the analysis shows that the contracts reviewed in January of this year, whether mortgages or loans companies, will see an increase in rates of five basis points, while those that carry out the annual review will record a rate increase of 65 points.

In the document they foresee that with current market expectations on interest rates, downward revisions will begin “from March 2024” for those contracts with annual review with 12-month Euribor. They calculate that these reductions “would be greater than 150 basis points” for the updates that take place “in the last stretch of 2024,” they reported.

Thus, between the month of December 2023 and the first quarter of 2024, the Bank of Spain emphasizes that 7% of variable rate mortgages that are pending payment (outstanding balance) would increase their cost by 100 basis points or more, while, for their part, 10% of the loans under these conditions would fall by at least 50 basis points.

Regarding business loans, the BdE points out that 2% of those with a fixed rate are exposed to an increase of 100 basis points, while 25% of loans at a variable rate would fall “50 basis points or more “.

Therefore, the agency predicts that throughout this year the interest payments on variable mortgages will begin a “gradual decline” to reach stabilization in the year 2025 to be at levels higher than those they were before they began. to raise rates by the ECB.

In the case of fixed-rate loans to companies, they foresee a “certain upward path” when they are repaid, since the vast majority of contracts were signed before the current cycle of rate increases.

Families prefer to pay off the debt.

During this period of the cycle of high interest rates and given the lack of profitability of savings in the bank, amortizations “have also been high in Spain”, which reflects incentives to amortize variable rate mortgages. That is, families prefer to use their savings to pay the mortgage rather than have them sitting in the bank.

This has made the household savings rate in the third quarter of 2023. But not only encouraged by high interest rates, but the high cost of living, with a rebound in consumer spending, “led to a decrease in the savings rate of 2.8 percentage points”, to 9.1%. . Despite the fall, the Bank of Spain reiterates that “it continued to be slightly above its historical average.”

“Families have continued to increase their liquid asset trends, while they have achieved a recomposition of their portfolios from cash and demand deposits towards other liquid assets with higher remuneration such as long-term deposits, Treasury bills and investment funds,” they say.

Thus, the lower debt and the increase in salaries have caused the household debt ratio to reduce to 76.6% of gross disposable income in the third quarter, the lowest level since 2022 and 12 percentage points per year. of the euro zone, which stands at 89%.