Families pay 40,000 million less in interest than in 2008

Published on April 25th 2018

The fall of the Euribor and the amortization of mortgages relieves Spanish households

Spanish households paid around 40,000 million euros less in interest in 2017 than in 2008. This saving is due to two factors: on the one hand, the ECB's policy, which has sunk the Euribor in negative territory. This has caused the average rate paid by families to go down, as they have variable-rate mortgages, from 5.97% in 2008 to 2.16% in 2017. On the other hand, the debt cut made by families during the crisis, especially amortizing mortgages. The interest savings are so high that the figure even doubles the drop in household incomes suffered during the Great Recession.

The interest payments of Spanish families fell back in 2017. According to INE statistics, this item fell to 15,383 million, compared to the 17,117 million in 2016 and the 54,561 million disbursed in 2008, year in which the Household debt exceeded 80% of GDP with an average rate of almost 6%. A decade later, the debt stands at 61% and the rate at 2%.

In 2017, family interest savings amounted to 39,178 million compared to 2008, almost 4% of GDP, practically the same as education or more than double what is spent on unemployment benefits. And what is more important: it doubles the drop suffered by household incomes in the crisis, which was 21,694 million in 2013 compared to 2008. If it had not been for this relief, the damage would have been much greater. In proportion to GDP, the interest burden is the lowest since the series started in 1996.

To this we must discount the little that Spaniards earn for their savings: families have gone from pocketing 29,063 million for the interests of deposits to only 4,247 million. Although households are losing 24,816 million in savings income, the figure is much lower than the 40,000 million that they stop paying. Thus, even having subtracted these amounts, Spanish families are, in net terms, great beneficiaries of the low rates, since they have much more debt than savings in deposits. Unlike German homes, they lose out.

In short, it is a transfer of income from households with savings to the indebted, from creditors to debtors. The ECB itself has stressed that the Spanish are those who have benefited most from this policy, thanks to the fact that the bulk of their mortgage debt is in variable rates.

 

Source: El País