Spanish Mortgage Default Rates Go Down In Sign of Improvement

Protesting bank repossessions. Photo credit: Antonio Marín Segovia / Foter / CC BY-NC-ND
Protesting bank repossessions. Photo credit: Antonio Marín Segovia / Foter / CC BY-NC-ND

The mortgage default rate of Spanish families fell in March to 5.8 per cent, while the default rate of developers went down to 34.7 per cent, according to new figures published by the Bank of Spain.

Over the last twelve months, the mortgage default rate has remained relatively static around 6 per cent. In absolute value terms, at the end of the first quarter, mortgages in default had a nominal value of €33,721 million, down from €34,236 million in December, compared to the total outstanding mortgage book valued at €574 billion.

A year ago, in March 2014, the mortgage default rate reached 6.3 per cent of total mortgage lending of close to €600,000 million, with mortgages of €37,858 million in default. The latest figures show both both the mortgage bad debt ratio, and total lending in decline.

Outstanding loans to developers are also in decline, as bad debts are written off and not replaced with new lending. In March developer loans fell below €150,000 million to €146,613 million; of this, €50,948 million (34.7 per cent) were impaired.

A year earlier, at the end of Q1 2014, the mortgage default rate among developers and estate agents reached 38 per cent, when the loan portfolio for the sector exceeded 170,000 million and default loans were close to €65,000 million.

Declining bad debt ratios amongst both private families and property developers are a sign of improvement in the Spanish property market. However, the overall decline in outstanding loans suggests that financing available for both home purchase and development is shrinking, presenting a challenging headwind to any recovery in the wider housing market.

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