Spanish new mortgages drops for 15th month

The number of mortgages issued for Spanish homes dropped in July for the 15th month running, official data showed last Thursday, confirming weakness in the property sector that is hurting banks.

There were 29,523 new mortgages in July, 47 per cent less than from a year earlier and the lowest number since the current statistical series began in 2003, the national statistics institute said in a statement.

The value of mortgage lending during the month totalled €3.27 billion, a 51.8 per cent drop over the same time last year.

The decline reflects banks’ reluctance to lend in a country with a jobless rate of just under 21 per cent, the highest rate among members of the Organisation for Economic Cooperation and Development.

The drop is also due to the end of a tax incentive on new home purchases at the end of December to encourage buyers to bring forward purchases and work through a backlog of hundreds of thousand of unsold homes.

Last month the government announced it would temporarily slash the sales tax on house purchases to four per cent from eight per cent aimed at reducing the stock of around 1.5 million unsold homes.

Spain’s home-building boom, one of Europe’s largest, started to deflate in 2008 after prices reached nearly three times their 1997 levels and after years of overbuilding.

The correction was hastened by tougher financing conditions in the aftermath of the US subprime mortgage crisis and it has caused bad loan ratios at Spanish banks to rise.