Over 1.5 million Spaniards use 40% of their income to pay their debts – EURACTIV.com

High inflation and rising interest rates are increasingly endangering the situation of Spanish households, and those spending more than 40% of their income on debt repayments could now exceed 1.5 million.

The Bank of Spain (Banco de España, BDE) estimates that the proportion of indebted households that would become “highly indebted” would increase by nearly four percentage points, meaning around 350,000 households would be at serious risk, according to a new report. BDE study, EURACTIV partner EFE reported.

Left-wing coalition partner Unidas Podemos (United We Can/GUE-NGL) recently warned his socialist ally (PSOE/S&D) in the Spanish executive that the current crisis could translate into a structural crisis, provoking a new crisis in the Spanish banking system.

The Euribor rate continued to climb in October, albeit at a slower pace than in September, when it recorded the biggest rise in decades.

On Thursday, the European Central Bank (ECB) raised interest rates in the EU another 75 basis points to 2%, which also fueled a further rise in the Euribor rate, the financial daily Cinco Días reported.

In the case of a standard mortgage in Spain – €150,000 over 25 years with a 1% differential linked to Euribor – the monthly payment will increase from €533 to €761, i.e. €228 more per month or 2 €736 more per year for an average family.

For a home valued at €180,000, the increase would be around €3,300 per year.

ECB President Christine Lagarde warned last week against further, albeit possibly gentler, rate hikes to prevent the European economy from sliding into recession next year.

(Fernando Heller | EuroEFE.EURACTIV.es)