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Moody’s Warns of an Increase in Defaulted Payments in Europe

The depreciation in house prices will put borrowers and their portfolios at risk, and so the volume of doubtful and non-performing loans may increase.

Unsecured loans such as unpaid credit card balances and unsecured consumer loans will be more sensitive to rising unemployment and household debt in Europe as a result of the coronavirus outbreak, according to a report released today by Moody’s.

Consumers who are under financial stress after the Covid-19 crisis are more likely to suspend payments on those loans, said the agency. It also considers that recoveries after default are likely to be low, given the lack of collateral. “The degree of weakening in the performance of the agreement will depend on the sharpness and duration of the recession and the exposure of the transactions to borrowers with a higher probability of interrupted income, such as self-employed workers and temporary contractors,” explains Rodrigo Conde, analyst at Moody’s.

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