Spain’s official mortgage arrears is low as a result of strong fundamentals rather than “magical processes,” the country’s mortgage association said.
Low interest rates mean that many mortgage holders are now paying less in repayments than when they took out the loan, the Madrid-based association, known as AHE, said in an e-mailed statement today. Spaniards under 30 years old, for whom the unemployment rate is about 40 percent, account for only 4 percent of mortgage loans, the group said.
A debate is raging over whether official mortgage default rates of about 2.7 percent accurately reflect the true level of losses with unemployment at more than 24 percent and analysts predicting the economy will shrink this year and next.
Banco Santander SA Chief Executive Officer Alfredo Saenz said April 27 that anyone saying that mortgage defaults were a problem for Spanish banks was “saying something stupid.” He made his comments a day after JPMorgan Chase & Co. analysts Roberto Henriques and Gareth Davies wrote in a report that the prospect of increasing losses on the more than 600 billion euros ($749 billion) of Spanish home loans could be the “next elephant” for Spain as unemployment spurs defaults.
Other factors that help keep down mortgage arrears include unemployment benefit payments, the use of loan guarantors and the fact that Spain has a sizable hidden economy, AHE said.
“It’s very frequent that family cohesion is behind the solution of not a few situations of non-payment,” the group said. “Parents and siblings not only help to maintain the family but also contribute financially to the payment of installments.”