Finance stays cheap in Spain

Loans and other consumer and corporate credit will not become more expensive for at least another year now that the European Central Bank (BCE) has decided to keep the Eurozone interest rate at 0 percent until June 2021, when the situation will be reviewed.
Marginal credit facility interest will stay at 0.25 percent and deposit facility interest at -0.5 percent.
The aim of keeping interest rates down is to make it easier for companies and individuals to obtain credit and, although it was initially expected that rates would rise this or next year, the Covid-19 pandemic has inevitably caused the Eurozone economy to shrink, along with that of practically every other country affected.
Since late March, the BCE has been buying up debt from within the common currency area to enable it to tackle interest rate rises in national markets created by the global health crisis, and has pledged to continue to do so until the pandemic is over.
It will continue to reinvest these until at least the end of 2022, and its debt-buying programme is flexible enough to allow it to focus on specific countries where a nation’s investment risk starts to rise rapidly.
The BCE expects its interest rates to remain at current levels, or even lower, until it sees that inflation rates start to reach its ongoing target of just below 2 percent. Also, the Bank has pledged to ‘provide widespread liquidity’ through its ‘refinancing operations’.
Provision of liquid assets to Eurozone banks, on the condition that these institutions contribute to supporting their local and national economies, has proven a popular move and demand is ‘very high’ across the common currency area, the BCE explains.
Consumer credit has become much cheaper in Spain in the last few years, especially since the financial crisis, a factor which has helped reactivate the country’s economy.
These interest rates do not affect mortgages in Spain, which are governed by the Euribor, and which has been in negative figures for over four-and-a-half years.
The plummeting Euribor has made mortgages and home-buying much more affordable since the financial crisis brought a wave of repossessions, a situation which is unlikely to be repeated now Spain has adopted the European directive which prevents lenders from applying abusively-high interest as non-payment penalties, and stops them evicting homeowners for defaulting on their mortgages until at least 12 monthly repayments are owing, or 20% of the full loan unpaid, whichever is the lower.