Spanish households goever deeper in debt

6 August 2004

MADRID – Spanish families have never been higher in debt, according to figures released on Friday by the Bank of Spain.

Mortgages, credits and outstanding bills have risen to a record high of EUR 525,573 million, equivalent to almost 70 percent of the country’s Gross Domestic Product (GDP).

The latest figures, for March, confirm the ever-growing habit of borrowing on credit. Family debt has soared from EUR 200,000 million in 1996 when it represented 43.3 percent of GDP.

In the last year alone, from March 2003 to March 2004, the amount has grown by 17 percent said the Bank.

Analysts attribute the rapid increase to the expansion of the mortgage market, which is growing at a rate of over 20 percent and shows no signs of slowing down.

Of all family debts, more than 83 percent – EUR 437,315 million – is linked to long term repayments, most of it in mortgages.

Low base interest rates, currently fixed at two percent by the Central European Bank, and ever higher property prices have encouraged families to invest their money in bricks and mortar rather than savings, say the experts.

The Bank of Spain, which has already given several warnings about the high amount of money being lent, said recently that there were no signs of a slowdown in the second quarter of the year.

The Bank’s figures show family assets, including shares and savings, also grew, by 15.2 percent in the past year.

But despite reaching a new record in absolute terms of EUR 1,279,050, they are still well below the maximum level of 183 percent of GDP reached at the end of 1999.

It is a similar story with the calculation for the net wealth of families – assets less debts. While the figure for the first quarter hit another all-time high of EUR 753,476 million, this represents just 99.7 percent of GDP compared with 130 percent five years ago.

[Copyright EFE with Expatica]

Subject: Spanish news