Learn the four fundamental criteria banks prioritize for affordable mortgages, as rising rental costs strain household finances across the nation.

The four fundamental criteria that banks prioritize when extending more affordable mortgage options are increasingly overshadowed by the stark realities of the rental market. The official recommendation suggests that households should allocate no more than 30% of their income towards monthly rent payments. However, the escalating costs of renting have rendered adherence to this guideline a Herculean task across numerous Autonomous Communities.

Recent data reveals a staggering increase in rental prices, with a reported rise exceeding 11% in November compared to the same month in 2023, and a 1.5% uptick from October, culminating in an average of 13.3 euros per square meter, as per the latest report. This pervasive increase, observed across all provinces in Spain, exacerbates the challenge for tenants striving to comply with the Bank of Spain’s (BdE) recommendation to limit rent expenditure to 30% of their salary.

In a rather disheartening revelation, only five Autonomous Communities allow tenants with an average salary to meet this official guideline when renting an 80-square-meter dwelling. Conversely, when considering the median salary—a more representative metric that divides the workforce into equal halves—no community permits compliance with this directive, a situation mirrored by those earning the minimum wage.

For those contemplating a more modest abode of 50 square meters, the situation remains grim. With a median salary, seven communities fall short of the recommendation, while only two manage to meet it under the constraints of the minimum wage. 

To illustrate, the average salary stands at 2,246 euros across 12 payments, according to the National Institute of Statistics (INE) data from 2022. To adhere to the 30% guideline for an 80-square-meter residence, the monthly rent should ideally be capped at 673.8 euros—a figure only attainable in Castilla y León (672 euros), La Rioja (656 euros), Murcia (648 euros), Castilla-La Mancha (584 euros), and Extremadura (560 euros). Those earning below 1,870 euros monthly face an uphill battle to afford rent for an 80-square-meter dwelling.

With a median salary of 1,865 euros, the maximum permissible rent to comply with the BdE’s recommendation would be 559.5 euros. This figure is precariously close to the average rent in Extremadura, the community with the lowest average price per square meter, where an 80-square-meter home commands an average rent of 560 euros. Thus, to meet the BdE’s guideline in this region, a salary of approximately 1,870 euros per month is essential.

On the other hand, for those earning the minimum wage (1,323 euros), the maximum allowable rent to adhere to the 30% rule is a mere 396.9 euros, effectively disqualifying all Autonomous Communities from compliance. However, smaller households fare slightly better; in a 50-square-meter residence, with an average salary, several regions including Galicia, Aragon, Asturias, Melilla, Navarra, Cantabria, the Valencian Community, and Andalusia manage to meet the 30% threshold.

Yet, the stark reality remains that in the five Autonomous Communities where rental prices soar, tenants earning an average salary or less cannot adhere to the 30% guideline. In the Canary Islands, for instance, the average rent for a 50-square-meter home reaches 700 euros, while an 80-square-meter unit escalates to 1,120 euros. The Basque Country follows suit with rents of 710 euros for 50 square meters and 1,136 euros for 80 square meters. The Balearic Islands, Catalonia, and the Community of Madrid present similarly daunting figures, necessitating monthly incomes of 2,330 euros, 2,370 euros, 2,920 euros, 2,970 euros, and 3,100 euros respectively, to comply with the official recommendations.

In a report released last October, the Bank of Spain underscored the alarming trend of increased rental burdens, particularly in urban centers where rental prices have surged over the past decade. Notably, the demographic most adversely affected comprises low-income households, with the median rental effort for these groups soaring to 43.1% in Spain in 2022, starkly contrasting with the EU-27 average of 31.9%. This data paints a sobering picture of the rental landscape, where the dream of affordable housing remains tantalizingly out of reach for many.