The effect of the financial crisis on default by Spanish households

We analyse the default behaviour of Spanish households immediately before and after the recent financial crisis. Using several waves of the Survey of Household Finances (a tri-annual survey of financial position of Spanish households), we show that younger, poorer and less well educated households are most likely to default. A key contribution is to explain the change in arrears since the onset of the crisis. Using information on credit applications and acceptances we decompose the change in arrears among all households into a contribution from four parts: (i) changes in characteristics; (ii) changes in applications; (iii) changes in acceptances; (iv) changes in arrears among borrowers. We show the last is the most important contribution.