According to new figures from the Spanish Mortgage Association (Asociación Hipotecaria Española, AHE) the number of mortgages from Spanish banks fell 6% in 2011, the largest drop ever recorded.
At year end the mortgage balance stood at 1,009,656 million euros, the report shows.
In absolute terms, the net decline in mortgage lending was 67.271 million. In December alone it shrank by over 8 million euros, representing a decrease of 0.5% over the previous month. The data confirms the contraction suffered in Spain for the last four years. This is in contrast with growth exceeding 20% experienced during the peak of the housing boom.
By December, 543,766,000 euros in mortgages had been approved by savings banks, 6.54% less than a year earlier. For banks, the balance stood at 374,491,000, a 5.69% decrease from December 2010. Meanwhile, credit unions granted 67.058 million in loans, 4.87% less than the same period last year, while credit institutions account for 13.807 million euros, 36.02% more than in 2010.
With regard to new borrowing there has been a collapse in loans for private and corporate borrowers. According to the Bank of Spain the form of credit that suffered the most was families borrowing for property purchases. During 2011 banks granted 37.525 million euros in mortgages, a figure that is 46% lower than the year before when they loaned nearly 70,000 million.
The association suggests that the downward trend is likely to continue over the coming months, at least during the first half of this year.
In December the AHE predicted that the “turbulent” economic environment in Spain, and internationally, provides an “uncertain future”. However, a broad improvement in credit in the real-estate business is expected by the AHE.
The credit crunch became more severe in 2011, and when the crisis deepened it resulted in difficulties in obtaining finance. It is these circumstances that have reduced the overall balance of the mortgage portfolio which has reduced by 5.7%.
With the crisis continuing the market looks uncertain. On one hand falling house prices and interest rates are likely to increase the number of mortgages, while on the other hand economic pressure and rising unemployment could reduce borrowing.
Mariano Rajoy’s recently elected government has already approved financial reforms in an attempt to “clean up” the banks balance sheets and reduce their exposure to bad loans.