Spain home NPLs at top of the agenda

Evicted families are being increasingly supported by social movements whose leaders gained notoriety, public sympathy, and finally votes in the last local elections. Barcelona’s next mayor Ada Colau built her reputation in anti-eviction platforms. 

Both Ms Colau as well as Madrid’s Manuela Carmena – a retired judge who is likely to lead a coalition into power– will launch measures to put an end to evictions, seen by the public as one of the banking sector’s main abuses.

More than six million families have signed a home loan in Spain, corresponding to 30% of the current housing census. Home loans are the banks’ largest loan portfolio and the Spaniards’ main asset (80% of home owners.) Being an apartment owner is like having a private pension plan.

 NPLs rate is low. The banking crisis did not happen as a result of  families’ defaults on mortgages but rather promoters’ (including financial institutions) after the property bubble burst. Overvalued land, unfinished housing promotions… Mortgages were granted at very reasonable prices, with a 3.5% average interest rate and long term maturities. The mortgage system works, but the procedure for the execution of defaulters less so: it is inflexible, too favourable to the creditor.

The banks’ reputation has suffered a lot, in the same way as the government has lost a lot of public support. Evictions have been a crucial point in the political parties’ programs. And they will continue to be at the top of the agenda. Lenders could suffer a double punishment by losing both prestige and money.