Fitch Ratings says in its latest Mortgage Market Index report that the Spanish economic recovery is feeding into mortgage performance.

Loans in late-stage arrears (including defaults) have decreased for the second quarter in a row to stand at 6.2% in December 2014 from their most recent peak of 6.4% in June 2014. Although the volume of borrowers in late-stage arrears remains elevated, the declining trend does appear to be established and Fitch expects it to continue.

Another positive indicator is the decline in the pace of new defaults. As of December 2014 the constant default rate was at 1.2%, 0.5% below the value reported 12 months ago. Unsurprisingly, the highest default rates continue to be reported for loan portfolios issued between 2005 and 2007, but even these vintages have come down from their most recent peak in the second half of 2013.

National home prices increased for two consecutive quarters for the first time since Q3 2007, with quarter-on-quarter growth of 0.2%. The stabilisation in home prices is also evident from information received on properties in possession and sold. The data suggests that properties sold in the first three quarters of 2014 had depreciated by nearly 70% from their original valuations, which is the same level of decline reported in 2013.