Loan defaults rise to highest level in over 50 years

Non-performing loans in the Spanish financial sector rose to 13 percent in October, the highest ratio since the Bank of Spain began compiling the figures over 50 years ago.

The central bank said loans that had not been serviced for over 90 days as of the end of October totaled 190.971 billion euros, partly reflecting the weak state of the economy but also as a result of new rules introduced by the supervisor regarding the classification of restructured and refinanced loans. The ratio was also increased by the fact that total lending continues to fall. Total outstanding loans as of the end of October stood at 1.469 trillion euros, down from 1.481 trillion the previous month.

Home loan defaults

Although the economy pulled out of recession in the third quarter of this year, the incipient recovery is anemic and patchy. Unemployment also remains high at 26 percent, which is the major factor behind the jump in defaults on mortgage loans to individuals, which stood at 5.36 percent in October, up from 3.62 percent a year earlier.

According to the latest available figures, outstanding loans to real estate developers amounted to 195.083 billion, of which 65.670 billion were non-performing, 33.6 percent of the total. The property market remains in a slump that dates back to around the start of 2008 when a massive bubble burst.