Bad loans as a proportion of total credit at Spanish lenders rose to 6.19pc in February from 6.06pc in January as a real estate crash and unemployment at more than 20pc drove up defaults.
Loans in default jumped to €112.5bn from €110.7bn in January as the bad-loan ratio climbed to its highest level since September 1995, according to data published yesterday by the Bank of Spain. The bad-loans ratio a year ago was 5.4pc.
Rising losses linked to real estate have forced the government to set new minimum capital requirements for lenders this year as the Bank of Spain classified almost half of the €217bn in loans by savings banks to the property development and building industry as "potentially problematic".
Rising interest rates in a country where more than nine out of every 10 mortgages are floating also threatens to drive up defaults.
Bad loans as a proportion of total lending at commercial banks rose to 6.36pc from 6.28pc in January and 5.29pc a year ago. The default rate for savings banks was 6.06pc in February from 5.89pc in January and 5.43pc a year ago.
Banco Espanol de Credito, a unit of Spain's biggest lender Banco Santander, said on April 12 its loans newly classed as in default fell to €27m in the first quarter from €180m a year earlier as the bank said it recovered more unpaid loans and booked few gross defaults.
Meanwhile, Spanish home prices fell for the 10th quarter as sellers scaled back their demands in a bid to complete sales before interest rates rose, deterring potential buyers.
The average price of houses and apartments declined by 4.6pc in the three months through March from a year earlier, the Housing Ministry said. Prices dropped by 2.5pc from the previous quarter.
Spain, which has the highest unemployment rate in Europe after almost two years of recession, also has the highest ratio of outstanding floating-rate mortgage loans in the region, according to data compiled by the European Mortgage Federation.
"Rate rises discourage buyers and sellers dropped asking prices before rates increased to encourage sales," said Fernando Encinar, head of research at Idealista.com, Spain's largest property website.