OREANDA-NEWS. Fitch Ratings says in its latest Mortgage Market Index report that Spanish home prices have bottomed out, but the persistently low level of recoveries from the sale of properties in possession indicates that nationally, home price growth will be slow and uneven.

Loans in arrears by more than three months (excluding defaults) continued their downward trend, to 1.4% in July 2015, from 1.9% a year ago. Although the number of borrowers in late-stage arrears is still well above pre-crisis levels (0.2%), Fitch views this downtrend as positive, and expects it to continue.

Also positive is the decline in the pace of new defaults, which at 0.9% as of end-July 2015, is 44bp below the value reported 12 months ago. The highest default rates are reported for transactions that closed between 2005 and 2007, but even these vintages have reported improved performance since their most recent peak in 2H13.

According to the Spanish National Institute of Statistics (INE), the Spanish Housing Price Index (HPI) rose 4% yoy in 2Q15 - the biggest increase since 2007. The HPI has now shown annual growth for five consecutive quarters, in line with our long-held view that the Spanish residential property prices would stabilise in 2014-2015 after seven years of declines. The recent fall in mortgage costs suggests the return of credit flows to households will continue to aid the gradual recovery of property prices.

Fitch's 'Mortgage Market Index - Spain' is part of the agency's quarterly series of index reports. It includes information on the performance of residential mortgages, predominantly from RMBS transactions, but also those held on bank balance sheets. The report sets the housing market against the macroeconomic background and provides commentary on emerging trends. The report is available at www.fitchratings.com or by clicking on the link above.

The data behind the report can be viewed in the RMBS Compare, an Excel-based tool for producing charts and comparisons of mortgage market indicators along with RMBS transaction performance. The RMBS Compare is available at www.fitchratings.com or by copying the link below onto your browser.