The number of Spanish mortgages issued for home purchases fell for a 16th month in August as banks rein in lending amid a surge in borrowing costs and bad loans.
The number of home loans fell 41.7 percent from a year earlier after a 47 percent drop in July, the National Statistics Institute said in an e-mailed statement today in Madrid. Total capital lent on all mortgages fell 40.9 percent, it said.
Spain is working through an excess of 700,000 unsold homes after a decade-long building boom collapsed, prompting a three-year economic slump that has pushed the unemployment rate to the highest in the euro region. Banco Espanol de Credito SA, the Spanish retail unit of Banco Santander SA, said on Oct. 11 its loan book shrank 7 percent from a year earlier, and its bad-loan ratio rose to 4.65 percent from 3.8 percent a year ago.
In the industry overall, the bad-loan ratio rose to 7.15 percent in August, the highest since 1994, according to the Bank of Spain. Home prices fell 5.5 percent from a year earlier in the third quarter, the 12th decline, the Public Works and Housing Ministry said on Oct. 18. Still, prices remain out of reach for many with the unemployment rate at 21.2 percent, rising to 46 percent among young Spaniards.
As part of efforts to reduce the stock of unsold homes, the government has lowered value-added tax on new homes to 4 percent from 8 percent for the remaining four months of the year. The move is the second attempt to spur purchases with tax incentives after a plan to give Spaniards a year to buy homes and lock in tax breaks prompted an eight-month increase in home purchases.
People’s Party leader Mariano Rajoy, the favorite in opinion polls to win the general election on Nov. 20, has pledged to bring back tax rebates for mortgage holders. The PP may win as many as 190 seats in Spain’s 350-seat Parliament, a poll by El Pais newspaper showed on Oct. 16.