The rating agency Moody’s warned this week that arrears in the Spanish banks will continue to increase in 2013, and some housing prices could continue to fall, years after the bursting of the housing bubble.
In their opinion, the excess supply of unsold homes along with the weak demand and, to a lesser extent, the moratorium on evictions, creates uncertainty about the number of foreclosures that may occur in the future.
In a published report, Moody’s said that in Spain, Ireland, Portugal and Italy, arrears and defaults will continue to rise, especially in the first two countries, while housing prices continue to fall.
This is despite the fact that next year Spanish and Irish banks will continue to refinance mortgages to mitigate, in part, the arrears, although it increases the risk of greater losses in the future if the crisis continues.
In this sense, El Mundo reported that Moody’s warns that loan losses in Spain could reach up to 70%, given that housing prices have fallen 50% from their maximum levels.
Moody’s argues that the losses in Spain and Ireland would rise “significantly” if banks begin issuing mortgages and selling property, instead of continuing refinancing and changing loan terms.
The agency admits that the direct impact of these changes is difficult to assess, but estimates that the Irish bank has modified around 11% of their mortgages in 2012, and Spanish banks just under 5%, compared with Italy’s barely 1.5%.