Bloomberg News

Spanish Mortgages Decline for 17th Month as Unemployment Rises

November 24, 2011

Nov. 24 (Bloomberg) -- Spanish mortgages issued for home purchases decreased for a 17th month in September as unemployment rose and banks reined in lending amid a surge in borrowing costs and bad loans.

The number of home loans fell 42 percent from a year earlier after a 41.7 percent drop in August, the Madrid-based National Statistics Institute said in an e-mailed statement today. Total capital lent on all mortgages fell 45.8 percent, it said.

Spain is struggling to digest a glut of 700,000 unsold new homes since the collapse of the building boom pushed the unemployment rate to 22.6 percent. The Bank of Spain estimates 176 billion euros ($235 billion) of soured assets linked to real estate have piled up on the books of the country’s banks, which are struggling with rising financing costs.

People’s Party’s leader Mariano Rajoy, who beat the ruling Socialists in general elections on Nov. 20, has pledged to bring back tax rebates for mortgage holders and clean up banks’ balance sheets as part of his plan to reboot a stalled economy and restore the AAA credit rating that Spain lost in 2009.

Spanish home prices have fallen 28 percent on average from their peak in April 2007, according to a Nov. 2 report by Fotocasa.es, a real-estate website, and the IESE business school. Property transactions fell 28 percent in September from a year earlier, the seventh decline, INE data shows.

--Editor: Alan Crosby, Andrew Davis

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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