New Mortgages

The INE has released April's new mortgage statistics. Lower month-on-month volume largely attributable to the Easter break. Considerably lower month-on-month average value also, but this is a typically noisy series. The more interesting 12-month average of this latter figure indicates a certain stability of prices at 2005 levels - or 2004, if one takes into account that no bank is giving out 100% loans as many did way back then.

To be seen is the effect that the 1% increase in the VAT on new home purchases will have. This comes into effect on July 1st and will begin to be reflected, due to the lag between purchase and the issue of the deed, in September. Our guess is the sellers - be they banks, cajas or developers - will swallow it whole, just as the major food chains have stated they will with their corresponding tax bump.

To be kept in mind is the potential effects of this month's civil service pay cuts. How much is to be seen, but this will take a piece out of house sales - although the recent cancellation of a proposed electricity price increase has this household's public functionary considerably less grumpy than she was a month ago.

On tap also for the new year is the removal of much of the tax deductibility of interest payments for a principal residence.

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