The number of new residential mortgages granted in Spain in April fell 42% year on year to 50,288, according to latest figures from National Institute of Statistics (INE). As elsewhere, Spain’s property market runs on mortgage lending, so this dramatic fall in new lending speaks volumes about the weak state of the market. These figures suggest the market is still deteriorating under the pressure of the credit crunch, with no end in sight. March was 25.5% down, so the figure for April represents a serious deterioration on some already bad months.

On a month to month basis the picture is no better. New lending fell 4.1% between March and April, and year to date, new mortgages are down 37.6% compared to same period last year.

To make matter worse, the average value of new residential mortgages is also down 18.4% to 115,442 Euros. Fewer, smaller mortgages means that the overall value of new mortgage lending is down 52.6% year on year, and 7% month on month. Mortgage credit has now fallen for 22 consecutive months.

Mortgage interest rates

The average mortgage interest rate agreed in April was 4.7%, a percentage fall of 8.2% in a year, and 7.7% in a month, thanks to falling Euribor base rates. However, whilst Euribor has fallen 63% in a year, from 4.82% in April 2008 to 1,771% now, mortgage interest rates have barely fallen at all. The difference is the result of lenders using higher margins to increase their profitability and rebuild their balance sheets.

Spain’s savings banks, known as cajas, lent for an average of 22 years with a rate of 4.82%, whilst banks lent for 20 years at 4.66%.

95.7% of new mortgages in Spain are still variable rate.