* Mortgage lending plunges by 43 bln euros in May

* Drop comes after new law boosts sellers paperwork

* Weak housing investment weighing on French growth

French mortgage lending dropped by 43 billion euros last month despite record low interest rates, data from the European Central Bank showed on Monday, as realtors said a surge in sellers’ paperwork burden was hitting transactions.

Such a large drop, nearly five percent over one month, is unprecedented for the French mortgage market and brought lending to its lowest level since October 2012.

That is bad news for the euro zone’s second-biggest economy, which stagnated in the first quarter of the year in part because household investment in real estate fell 2.6 percent.

Mortgage lending slumped even though French would-be home-buyers with solid finances can get a loan at record low interest rates, according to data from the Observatoire Credit Logement home loan guarantee body.

The drop comes after a new law came into force in April, requiring a huge increase in the amount of paperwork required to sell an apartment, including annual records from the owners cooperatives meetings and various certificates.

“Gathering the documents is extremely complicated and as a result a sales promise now reaches 650 pages where it was only about a hundred six months ago,” said Laurent Vimont, the president of the Century 21 France realtors chain.

The number of real estate transactions involving apartments is falling fast, down 10 percent in the second quarter, weighing on the overall volume of real estate transactions, Vimont said.

As a result of the new law, the average time it takes for a home sale to go through has reached 93 days, the highest on record apart from when it reached 96 days in 2009 during the worst of the financial crisis, according to Century 21’s data.

With real estate agents and sellers up in arms, the government has hinted that it might ease the paperwork burden as part of wider effort to trim back on red-tape strangling the housing market.

 

Article: www.reuters.com -June 30th, 2014, Reporting by Leigh Thomas; Editing by Toby Chopra)

The ECB’s data comes from the Bank of France, which will publish its own figures using a slightly different parameter on July 7.