Mortgage defaults are rising in 2020, in the midst of the coronavirus crisis and despite the moratoriums put in place by the government and banks during the lockdown.
According to data from the Spanish Mortgage Association (AHE), in the second quarter of the year, 3.5% of the outstanding balance of loans for the purchase of a home suffered defaults, which in volume terms is practically equivalent to 16,900 million euros, compared to 16,840 million euros in March and the 16,760 million euros registered at the end of last year.
In other words, the delinquency of mortgages accumulates two consecutive quarters of increases in absolute terms, while the NPL ratio (which relates the volume of defaults to the outstanding mortgage balance), registered its first rebound in spring since the end of 2016, when it went from representing 4.6% of the total portfolio to 4.7 %.
The change in trend that doubtful mortgages have suffered has occurred at the outbreak of the health crisis, and despite the moratoriums approved by the Government (known as legal moratoriums) and by the financial sector (sectoral moratoriums). Between both alternatives, which include as beneficiaries workers and the self-employed affected by the covid-19 crisis, and both for homes and for properties linked to economic activity (premises, offices …), there are more than 900,000 suspension of payments in mortgage loans, according to the Bank of Spain.
But nevertheless, the market believes that defaults could continue to rise in the coming quarters, coinciding with the end of requests for new moratoriums (the deadline expired at the end of September), an unprecedented economic recession, and the possibility that thousands of people who are in ERTE situation end up losing their employment, and many self-employed workers have to close their business.
“At the moment we are facing a scenario of uncertainty about how the pandemic will evolve, but what seems clear is that the deterioration that has occurred in the economy, aggravated by the second wave of the virus, will have a direct impact on delinquency, which will be to a greater or lesser degree depending on the scope of the pandemic. As the facilities made available to economic agents to preserve their financial situation, either in the form of moratoriums or public guarantee lines, we will surely see how delinquencies begin to rebound “, they argue from the research team of the mortgage association.
However, and despite doubts about how mortgage delinquency will evolve, the current figure remains well below the levels recorded during the crisis and from the maximums reached in the first quarter of 2014, when more than € 36.2 billion were recorded in delinquent mortgages. By then, the doubtful debt rate was above 6%, compared to the current 3.5%. In addition, financial sources ensure that the sector is open to negotiating loan conditions with clients who need it due to the health situation, which could minimize at least part of the defaults.
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