Default on Mortgages Marks a New Record High in Q1

1/07/2014 – Expansion

According to the data of the Bank of Spain, unpaid mortgages amassed nearly €37.9 billion out of the €599.1 billion credit portfolio in the first quarter of 2014.

The default on mortgages keeps on growing and in case of the loans to individuals it upsurged to 6.3% in the first quarter of the year, marking the new record high. The real estate sector only accounted for a 37.8% default at the end of 2013.

The delinquency jumped by 2 points in regard to the last year (4.22%) and it is higher than the 5.98% rate registered at the end of 2013. However, one shall take into account that even though the default hits the roof, the credit portfolio in banks shrank to the minimum since 2007.

During this period of time, banks held 36.2 billion in the unpaid mortgages only, out of the entire 576.2 billion loan portfolio, resulting in a 6.28% default rate.

Moreover, there have been 1.65 billion unpaid loans out of the total of 22.68 billion granted for dwelling refurbishment, giving a 7.27% default rate.

Developer debt

The indebtness accumulated by property developers against their lenders reached 171.2 billion in March, out of which amount 64.8 billion (37.85%) were non-performing,  exceeding significantly the 29.56% rate showed a year earlier, although slightly lower than the 37.99% registered at the end of 2013.

Alike mortgages, the loan portfolio of the real estate sector and its default have declined over the past months: the developer debt by 16% in the last year, while the unpayment fell by 3.54% in Q1 2014.

When it comes to construction solely, the default hits 33% with non-performing loans representing 19.27 billion inside a 58.4 billion portfolio, delicately lower than the 34.3% noted down at the end of 2013.

Other sectors also suffer high delinquency rates, for instance in case of hospitality it shows 21.24%, commerce 15.2%, the rest of the industries 13.47% and in agriculture 13.1%.

The blooming default development is said to be the effect of the regulation established in April 2013 by the Bank of Spain, setting the new rules for refinancing, renovation, renegotiation and restructuring of the loans and debt of the banks customers.


Original article: Expansión

Translation: AURA REE