What is the origin of the high household debt?
Mar 2, 2009
Every day large numbers of families are being affected by current economic conditions in Spain. Indeed, the problem comes in the wake of the sustained increase in market values of homes, creating a housing bubble, which was always gravitating on the economy. With the credit boom of the last 5 years we saw as a buyer of an apartment, apply for a mortgage loan covering the purchase price, the cost of operation and even some extra money to buy furniture. Not only do we settle for that, but we are 2 credit cards, a loan to buy a car and personal loan for the reform of the floor.
It is common in the mortgage market that Spanish mortgages are recruited using the Euribor reference. 5 years ago this index was in the order of 2%. A mortgage contract at this time had a very low cost. If the person gets into debt with every year that his house was worth more, it was foreseeable that if the EURIBOR, was increased by the causes that were, the impact on the family budget would be devastating. And it is exactly what has been happening. Here its evolution:
JANUARY 2004 2.216
JANUARY 2005 2.312
JANUARY 2006 2.833
JANUARY 2007 4.064
JANUARY 2008 4.498
Has increased by 100% since 2004. The effect in the letter of the mortgage is paid every year more and more.
What to do in this situation?
It is obvious that if we are to the neck in debt and interest rates climbed to the stratosphere, it is very possible that we have failed to pay one or more of the loans. In this case, we can do is:
• Negotiate with the bank conditions in the mortgage
• Reunifying debts
• andalusia benefit plan ICO foreclosure moratorium
• declare bankruptcy law applying concursal
In any case, we must take action sooner rather than later and try by all means to resolve the situation through the 4 options you have. The important thing is we win on quality of life and to maintain control of our finances.
Edgar Roquette
Financial Advisor
It is common in the mortgage market that Spanish mortgages are recruited using the Euribor reference. 5 years ago this index was in the order of 2%. A mortgage contract at this time had a very low cost. If the person gets into debt with every year that his house was worth more, it was foreseeable that if the EURIBOR, was increased by the causes that were, the impact on the family budget would be devastating. And it is exactly what has been happening. Here its evolution:
JANUARY 2004 2.216
JANUARY 2005 2.312
JANUARY 2006 2.833
JANUARY 2007 4.064
JANUARY 2008 4.498
Has increased by 100% since 2004. The effect in the letter of the mortgage is paid every year more and more.
What to do in this situation?
It is obvious that if we are to the neck in debt and interest rates climbed to the stratosphere, it is very possible that we have failed to pay one or more of the loans. In this case, we can do is:
• Negotiate with the bank conditions in the mortgage
• Reunifying debts
• andalusia benefit plan ICO foreclosure moratorium
• declare bankruptcy law applying concursal
In any case, we must take action sooner rather than later and try by all means to resolve the situation through the 4 options you have. The important thing is we win on quality of life and to maintain control of our finances.
Edgar Roquette
Financial Advisor
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