The on-going crisis in Greece has provoked stark images of ATM queues, crying pensioners and tapped out petrol stations since capital controls were introduced over the weekend.
But there's another less obvious financial crisis that's been bubbling away for a while now — a growing number of Greeks aren't paying their mortgages.
Credit ratings agency Fitch says that as negotiations between the Greek government and its creditors have dragged on, more and more mortgages have fallen into arrears — i.e. people are behind on payments.
Greek mortgage performance appeared to be stabilising before the January elections. Loans with at least one monthly instalment overdue represented around 16% of total loan balance. But they climbed to 16.9% in February in the aftermath of the elections, and continued to rise even after a temporary bailout programme extension was secured at the end of that month, reaching 17.3% in May. We expect early-stage arrears to have increased further during June.
That's a 1.3% jump in overdue mortgages in 5 months. Fitch thinks a big factor may be people "strategically" choosing to not pay their mortgage, settling other debts ahead of paying for their properties. The Financial Times recently reported a Greek banking source who said that 70% of restructured mortgages are also going unpaid. The Greeks seem to believe that banks are more likely to go after the bigger, richer houses.
Greek banks are in crisis right now. They're shut all this week and have effectively been on life support for months, supported by European emergency funding. Banks are unlikely to prioritise repossessing homes right now.
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