In the case of households, the credit terms of mortgage loans are much stricter than those observed pre-crisis, and in recent quarters no signs of easing have been perceptible. For example, in the case of the loan-to-price ratio (LTP), there has been a reduction in the weight of more leveraged transactions (with an LTP of over 80%) compared with the crisis years. Moreover, the average LTP is also lower. By way of exception, consumer lending and its attendant bad debts quickened once again in the final quarter to year-on-year rates of 12% and 26%, respectively, slightly raising the NPL ratio of this business segment to 5.6%. And this against the background of the considerable slowdown in private consumption in the economy. In terms of solvency, from June 2018 to June 2019 the CET1 ratio increased by somewhat over 30 bp to stand slightly over 12%. The rise was based essentially on an increase in reserves. This improvement in solvency was concentrated in the biggest institutions which are, precisely, those showing lower levels. Moreover, the bulk of the capital materialises in instruments with the biggest loss-absorption capacity. Compared with the other European countries, Spanish institutions have a top-quality CET 1 capital ratio almost 3 pp below the European average, whereas in terms of the leverage ratio, Spain stands slightly above the same average. It is well-known that this difference in Spain’s relative position in respect of these two solvency measures is due to the fact that the density of risk-weighted assets is higher in Spain.
The technical analysis assesses the recent trend of the indicators, their current status and also their expected behaviour in the coming quarters consistent with the macroeconomic forecasts prepared quarterly by the Banco de España. The forward-looking analysis is particularly relevant in this context since, in the event of the CCyB being activated, banks have 12 months to comply with the requirement. According to these indicators, the credit cycle continues to show values below the activation thresholds (having regard to the credit-to-GDP gap, which remains below its long-term trend value), although it is progressively converging on the long-term equilibrium level. In fact, forecasts as to how it will trend in the coming years indicate that this indicator will turn positive towards 2021 Q1 and might exceed the activation threshold in 2021 Q2. Some complementary quantitative indicators are along the same lines. This is particularly the case for credit intensity, which shows the weight of the change in credit relative to GDP, and the overvaluation of house prices currently show values close to equilibrium, with an upward trend that is forecast to continue over the next two years. Non-financial privatesector debt service, for its part, has maintained the reduction that marked its path at the start of the global financial crisis. Foreseeably, this reduction will continue, albeit more moderately so over the coming two years, given that the process of debt reduction has eased significantly and interest rates have less margin for further cuts.