The number of home loans granted by lenders in Spain fell to their lowest levels on record in August as tight credit conditions and high unemployment continued to depress the mortgage market despite a fall in prices.
According to figures released Monday by the National Statistics Institute (INE), the number of loans disbursed fell 13.1 percent from July and 28.5 percent from August 2011 to 21,106, the lowest figure since the INE began compiling the current series in 2003.
The biggest fall in mortgages was recorded in la Rioja, where they declined almost 60 percent, followed by Castilla y León with a drop of 42 percent and Aragon with almost 40 percent.
The fall in prices was reflected in the average value of the mortgages granted, which was 103,592 euros, down 3.3 percent from a year earlier. The total volume of lending declined 30.9 percent from a year earlier to 2.186 billion euros.
According to official figures released last week, house prices have fallen 25 percent from their peaks at the start of 2008. Experts reckon they will have to fall more to clear an estimated pile of 670,000 new housing units built up over a decade-long boom that came to an abrupt halt around the start of 2008.
The government is setting up a so-called bad bank to absorb the toxic real estate assets of the country’s banking sector. Those assets are likely to be transferred at strong discounts to their current book value.
Apart from a lack of liquidity, the country’s banks are also grappling with a jump in loan defaults as the country slipped back into recession. Non-performing loans in the banking sector hit a record high of 10.5 percent of total lending in August.