Spanish mortgage delinquencies rise to 2.6% by end-2023

Mortgage delinquency in Spain has risen to 2.6% at the end of 2023, with an increase of 0.3% compared to the end of 2022, according to data from the Spanish Mortgage Association (AHE) collected by the Bank of Spain.

The Spanish Mortgage Association (AHE) has revealed that delinquencies on loans granted for house purchases reached 2.6% at the end of 2023, compared with 2.3% at the end of 2022, according to data from the Bank of Spain. This increase has added around 900 million euros in doubtful mortgage assets over the year.

Despite this increase, the AHE points out that this rate of doubtful assets is at levels comparable to those observed at the beginning of the financial crisis in 2008, and far from the peak of 6% reached in 2014. The association explains that mortgage lending has historically had one of the lowest default rates due to the “sentimental implications” associated with home ownership.

In contrast, the NPL ratio for real estate activities has shown a slight improvement, standing at 3.0% at the end of 2023. The EHA points out that non-performing loans in this sector currently account for around 10% of non-performing loans in the corporate sector, a significant decrease from the crisis levels of 2011 and 2012.

By 2024, the EHA forecasts that mortgage delinquencies could experience upward adjustments, but the possible reduction in interest rates by the European Central Bank (ECB) could provide relief to households and companies in Spain. The association stresses that this reduction would benefit a large proportion of borrowers, especially those with mortgages that are subject to six-monthly reviews.

In summary, although the improvement in credit quality depends not only on the evolution of interest rates but also on the general health of the economy, mortgage delinquencies are expected to improve next year thanks to possible monetary measures by the ECB.

Original Story: Estrategias de Inversion
Edition and Translation: Prime Yield