Details released by financial comparison company Kelisto.es, revel this week that more than 580,000 people in Spain now have mortgages at a value greater than the property they used the loan to purchase.
In other words, one in ten of all mortgage holders are now in a situation that should the worst case scenario happen to them, losing their home would not be the end of the financial burden, as they would still owe a debt to the bank.
However, the company also envisage the situation as getting worse rather than easing and estimate that in 2015, the number of mortgage holders in this situation will reach more than 710,000.
This is the first time such a study has been conducted into the Spanish home financing market, which reflects an exponential growth during the last five years of those affected. In 2009, the so called “bubble only” mortgages accounted for 0.3% of all those outstanding, yet four years later, that figure has increased to 9.5% of the total at the end of 2013, resulting in the estimate of 11.3% of the total in 2015.
According to Estefanía González , responsible for personal finances at Kelisto, “The number of people affected has not stopped growing”, explaining that “The most significant increase occurred in 2011, when the number of “bubble” mortgages grew a spectacular 847% over the previous year.
In terms of money, the estimated figure involved in this crisis has been put at 13 billion euro by the end of 2013, with the estimated average difference in the value of the mortgage against the value of the property being in the region of 22,216 euro, based on an average mortgage of just over 100,000 euro.
The average price of housing in spain has fallen by 38.5% from 245,313 euro in 2007 to 150,787 euro in 2013, largely causing this situation to develop. Beyond the direct responsibility of the homeowners who may have borrowed in good faith, the value of the properties has simply dropped beyond any reasonable assumption.
The value of the mortgages is not around 114%, although in some cases it is as much as 140% of the appraised value, a figure also expected to increase over the next two years.
“We estimate that housing will fall by 17%, which will increase undoubtedly the number of “bubble” mortgages, especially those mortgages that were issued several years ago and now are on the border”, according to González.
The problem is spread across the whole of the country, but some areas are more affected than others. Catalonia and Madrid are the regions most affected by the impact this type of mortgage. In these regions, the price of housing has fallen by 47.2% in Catalonia, and 43.4% in Madrid. Of the total 581,441 homes that were worth less than their loans in 2013, 42.6% were concentrated in these two communities.
Third on the list of most affected regions in Valencia, where 11.6% of the total number of properties which are now worth less than the mortgage are located, a total of 67,181 homes, slightly ahead of Andalucía with 66,418, but considerably ahead of the next in place, Castilla y León, with 26,668.
Filed under: http://www.theleader.info/article/42414/