Spain's mortgage portfolio will fall 1.7% this year and will not recover until 2026, according to EY

MADRID, 26 Jun.

Spain's mortgage portfolio will fall 1.7% this year and will not recover until 2026, according to EY


Spain's mortgage portfolio will experience a decline of 1.7% this year and will not recover the levels seen in 2022 until 2026, according to a report prepared by the EY consultancy and published this Monday.

Specifically, the professional services firm estimates that the outstanding balance of the Spanish mortgage portfolio will end the year falling by 1.7%, to 484,000 million euros. In the following years it will grow again, but it will not be until 2026 when it will recover the levels of 2022.

For 2024 an increase of 0.4% is estimated, up to 486,000 million, while in 2025 the increase will be 1.1%, up to 491,000 million. In 2026 the outstanding balance will stand at 505,000 million, 2.8% more.

In an environment of high interest rates, the report maintains that financing conditions will continue to tighten, which will have an impact on demand, and also on delinquency.

However, the low performance of mortgage loans will be offset by consumer credit and business loans. In this way, the total credit of financial institutions will close this year at 1.222 trillion euros, 1.2% less, although in 2024 it will grow 1.2%, up to 1.236 trillion, to stand at 1.276 trillion in 2025 ( 3 .2%) and 1,317 billion in 2026 (3.3%).

"Despite the uncertainties that surround us, we can be optimistic for the coming years, with a cycle of rate rises that is coming to an end and inflation that is increasingly controlled. In addition, we are convinced that the deployment of the NGEU funds will significantly boost investment and boost the financing activity of credit institutions", stressed the partner in charge of Financial Services at EY Spain, Pedro Pérez.

Despite the increase in loans, EY believes that there will be an increase in delinquency. Thus, the non-performing loan ratio will rise seven tenths this year, up to 4.2%, while next year it will rise to 5.8%.

"All of this should be seen as an opportunity for Spanish banks to improve their risk management and customer service strategies, so that they can continue on the path of strengthening the banking sector that began after the 2007 financial crisis," Pérez added. .

With regard to the euro area as a whole, a report prepared by EY forecasts a slowdown in credit growth, going from 5% in 2022, the highest figure in 14 years, to more modest increases of 2.1% in 2023 and of 1.7% in 2024. This slowdown is due to the drop in credit demand throughout the region.

Demand for mortgages, which account for a significant share of total loans in the euro area, will slow to 1.4% growth in 2023, the lowest rate since 2014 and well below the 4.9% growth in 2022. However, a rebound is expected in the following years, reaching a mortgage growth of 2.5% in 2024, 3% in 2025 and 3.5% in 2026.