Higher interest rates take toll on savings

9 January 2008

MADRID – The savings rate in Spain continued to fall in the third quarter of last year as hefty debt levels and higher interest rates eroded households’ ability to put money aside for a rainy day.

The rate in the year to September dropped by 0.3 points to 9.9 percent, compared with the previous 12-month moving period, according to figures released yesterday by the National Statistics Institute. The third quarter of the year normally involves additional spending needs to cover summer holidays. Compared with the summer period in 2006, the savings rate rose by 0.6 points.

Interest payments hit a record of almost EUR 7 billion in the period July-September of last year. Household debt in Spain has increased sharply as a result of mortgages taken on during a massive property boom. At the same time, the European Central Bank has raised interest rates eight times by 25 basis points each time since the end of 2005.

The borrowing requirements of households in the third quarter stood at EUR 17.17 billion, equivalent to 6.8 percent of GDP.

Subject: Spanish news