New mortgage lending in Spain fell 41% to 8.3 billion Euros in July compared to the same month last year, according to new figures from the Bank of Spain.

The fall in July was consistent with a trend towards sharply lower mortgage lending that has been going on all year. Throughout 2008, monthly lending for new mortgages has run at around 8 to 9 billion Euros, compared to more than 14 billion per month before the credit crunch struck in the summer of 2007.

New mortgages are down sharply because Spanish lenders are unable to raise funds in the international debt markets, and are being forced to hoard their cash.

Given that the Spanish property boom was fuelled by cheap and easy mortgages, the dramatic fall in new mortgage lending is bound to put intense pressure on Spanish property prices. That, in turn, will make banks more reluctant to lend.