Spanish new mortgages plunge in June: statistics office

The number of mortgages issued for Spanish homes plunged in June, official data showed Monday, confirming weakness in the property sector that is hurting the country’s banks and economic growth.

The number of new mortgages declined 42.4 percent to 32,680 during the month from a year earlier, the National Statistics Institute said in a statement. They were down 13.1 percent from May.

The value of mortgage lending slumped 47.1 percent from a year earlier to 3.58 billion euros ($5.19 billion).

The decline reflects banks’ reluctance to lend in a country with a jobless rate of just under 21 percent, 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.

Spanish courts carried out a record 93,622 foreclosure last year, nearly four times the amount in 2007 just before a property bubble collapse.

Earlier this month the government announced it would temporarily slash the sales tax on house purchases to 4.0 percent from 8.0 percent aimed at reducing 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.