Under a scenario consistent with the Banco de España’s March 2022 projections, the exercise included in the Financial Stability Report estimated that firms’ interest expenses as a percentage of gross operating surplus would begin to increase from 2023 onwards to stand, by the end of 2024, 1 pp above 2021 levels. In any event, the subsequent upward revision to market expectations of future interest rates means that the estimated share of firms’ interest expenses as a percentage of gross operating surplus is likely to rise by a further 1.8 pp by end-2024, increasing by a total of 2.8 pp on their 2021 level.16  16  Given that business income may be expected to fall under this scenario, the increase in the weight of interest expenses should be considered to be the lower bound of the total impact of the rise in interest rates. Meanwhile, every additional 100 bp increase in short and long-term interest rates above the levels currently priced in to market expectations is likely to add an additional 1.7 pp to the weight of interest expenses in 2024. 12  For households, moderate interest rate rises would have a relatively small impact on their debt repayment capacity, partly because of the increase seen in recent years in the proportion of fixed-rate mortgages, which accounted for 24.9% of the outstanding amount at December 2021.
Based on the latest microeconomic information available,17 it is estimated that the increase in interest rates since the start of this year (of 1.6 pp for the 12-month EURIBOR,18 the main interest rate to which the stock of mortgages in Spain is linked) will lead to a rise of almost 2 pp in the proportion of households with a high net interest burden.19 This effect would be most pronounced among indebted households between the 20th and 40th percentiles of the income distribution.20  17  This exercise was conducted drawing on information from the 2017 Spanish Survey of Household Finances (EFF by its Spanish abbreviation). The latest Financial Stability Report includes the results of the exercise for various interest rate hike scenarios. It was found that the proportion of households with a high net interest burden would rise by 1.2 pp, 2.3 pp and 3.9 pp, respectively, if interest rates were raised by 100 bp, 200 bp and 300 bp. 18  The 12-month EURIBOR has risen from -0.501% at 31 December 2021 to 1.091% at 20 June 2022. 19  The net interest burden is considered to be high when the ratio of (debt service expenses - interest income from deposits) to household income is over 40%.