Borrow money to cover unexpected expenses it’s getting more and more expensive. The banks the cost of consumer credit has shot up by more than 16% at a time when family budgets are getting tighter due to high inflation and the increase in mortgage payments due to interest rate rises. The interest charged by entities for consumer loans once again exceeds the 8% threshold and reaches record levels of the last four and a half years.
The credit destined to buy goods and to cover unforeseen expenses is more expensive than, for example, mortgages, because the banks assume more risk for your return. But in Spain, higher interest rates have traditionally been applied than in Europe and the gap continues to open.
The type TEDR, which is equivalent to the APR (annual equivalent rate) without including commissions, for new consumer loans between one and five years reaches 8.21%compared to the 6.67% average for the euro zone, according to the latest data available from the European Central Bank (ECB), corresponding to the month of March. Or what is the same, it is 20% more expensive than the average in Europe.
Only banks in countries like Lithuania, Estonia and Slovakia apply higher interest than in Spain, with a rate that exceeds 10%”
But the gap widens when compared with other European powers. For this type of loan and for the same term, banks in France they finance consumption with an interest rate of 5.69% and in Germany with 6.39%. This is a lower price by 44% and 28%, respectively, compared to the conditions with which the Spanish banks grant this credit.
It still does not include the latest ECB rate hike
The cost is also above that applied by its competitors in Italy (7.86%) and Portugal (7.83%), and it is only surpassed by countries such as Lithuania, Estonia and Slovakiawhere the interest is double digit (more than 10%).
In Spain, the cost has gone from 7.05% to the aforementioned 8.21% in one year, even though the latest rate hike of another 25 basis points from the European Central Bank (ECB) applied this month has not yet been included. The price of money is now at 3.75% and the central bank promises a strong hand if it fails to subdue inflation, which in the euro zone rose to 7% in April, the latest data available.
The higher cost of consumer credit adds to the unattractiveness of deposit returns in Spain. With Santander, BBVA and CaixaBank without the need to capture savings, the interest paid by entities for the traditional savings product represents a third of what banks offer on average in Europe both companies and individuals.
Impact on reputation
A notable difference that is already making a dent in the reputation of the sector, with thecustomers complaining at bank branches to demand more remuneration, as admitted by internal sources from one of the large Ibex banks.
But neither does it seem that the remuneration of deposits is going to take off in the short term. Entities prepare a mortgage offensive to attract customers more solvent due to the slowdown in demand. This strategic movement would anticipate payment for deposits.
