Abstract:
In Spain, the interest rates of new loans for purposes other than home purchase are, in general, higher than those of neighboring countries. These differences may be due to the fact that the characteristics of the indebted are different or that Spanish families pay interest rates higher than those paid by similar ones in the rest of the countries —for regulatory reasons, due to a different degree of competition or other factors— . The information from the Survey on the Financial Situation and Consumption of Households in the Eurosystem —which collects information on the wealth, debts and income of households in each country of the Eurosystem— shows that the indebted Spaniards have fewer assets and a greater probability of being unemployed than those of the rest of the countries considered. However, the differences in these characteristics of the indebted only explain a small part of the difference between the interest rates of Spanish personal loans and those of the rest of the countries. Therefore, most of the difference is due to the fact that Spanish financial institutions value the characteristics of households differently. One possible reason for the higher interest rates in Spain is that, even when comparing employed individuals with similar characteristics, the risk of job loss is higher for Spanish households than for German and French households, and , for the same level of income, this is more unstable than that of German households. On the other hand, it is observed that indebted Spanish households that pay higher interest rates are also more likely to experience delays in debt payments and drops in income in the future. Therefore, in Spain the high interest rates reflect this greater instability of future income.–
