Consumer Debt Suddenly Surges in Spain, Banks Love it, But Regulators Begin to Fret

Beware of a 2008 redux

Rigged Game

Bad habits die hard.

So it is that banks in Spain are once again beginning to significantly relax their lending standards. This includes the resurrection of the 100% mortgage, a high-risk instrument that notoriously helped fuel Spain’s madcap property boom over a decade ago. But it’s in the consumer loan market where the alarm bells are ringing loudest.

According to the Bank of Spain, in 2017 banks issued 15% more consumer credit — loans for the purchase of consumer goods like cars, furniture, electrical appliances and holidays — than the year before.

In fact, consumer credit is rising much faster than mortgage debt, according to the Bank of Spain’s latest provisional data. The total amount of consumer credit in Spain rose by 4.5% in just the month of June, from €177.8 billion in May to €186.3 billion in June, while the total stock of mortgage debt rose by a barely…

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