Default on Home Loans Declines For First Time Since 2010

19/09/2014 – Expansion

Delinquency rate on mortgages lent to individuals fell at the end of the first half of the year by twenty basic points, down to 6.08%. Also, the default on builder loans diminishes, while the developer credits continue to climb up.

The loan and default data was published yesterday by the Bank of Spain. They indicate that shy green sprouts start to appear in the financial sector. Specifically, in June, the first turn in continuously growing delinquency pattern was observed, something not seen since the end of 2010.

Though, the rate still remains very high if compared to the performance of the Spanish banks before the recession. In June, it marked 6.077%, by 20 bps less than a month earlier. Reviewed with the first quarter of the year, the figures confirm the estimations of principal entites of the country that the default is peaking.

In detail, at the end of June, they had nearly €570.8 billion in home mortgages in their balance sheets, almost by €5.68 billion less than in Q1 2014 and by 3.9% less than in June 2013. The fall in credit balance was compensated by shrinking volume of delinquent loans which declined by €1.2 billion in the second quarter of the year.

Real Estate

During the month of June, also builders default rate decreased from 33.01% to 32.52%, after toxic assets reduced by €1.2 billion were compensated by fall in lending.

In turn, delinquent real estate developers increased their contribution in June, sending the March optimism down to the history. The rate calculated on unpaid loans linked to property presently shows 38% and the credits themselves amount to €61.33 billion. This way, the second quarter of 2014 joins three previous consecutive quarters marked with decline. However, developers credit balance dips down even more as the entities have stopped lending to this sector, struggling to offload their real-estate-owned assets, transferred to their servicers.


Original article: Expansión (by Michela Romani)

Translation: AURA REE