Spain's 2025 in Structured Finance So Far: House Price Growth Continues to Put Pressure on Affordability
ABCP, Auto, RMBSSummary
Approximately 76% of Spain's new issuance so far this year has been in residential mortgage-backed securities (RMBS). Spanish homeowners with floating-rate loans experienced some relief as Euribor declined over the past 12 months. However, homes in Spain are still less affordable than the euro area average based on house price-to-disposable income ratios (a proxy measure for affordability). In addition, house prices rose across all Spanish regions in 2024, and we expect this to continue in 2025 given Spain's short supply/high demand housing market dynamic. We are most concerned about reperforming mortgage loans in securitisations since borrowers of this mortgage type have previously missed payments and are likely more vulnerable. Meanwhile, we expect prime mortgages' performance to not deteriorate and possibly even improve this year given the Euribor decrease, borrowers' lower indebtedness levels, and a positive unemployment outlook. Indeed, prime RMBS is performing better than before; its 90+-day arrears rate dropped in Q1 2025 to about 2.5% after rising steadily in 2023 and H1 2024.
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