UPDATE 2-Spanish house sales dive, prices to follow

(Recasts, adds analyst comment, background)

By Ben Harding

MADRID, July 28 (Reuters) - Spanish house sales plummeted in May for the fourth month running, official figures showed on Monday, and prices are expected to follow soon given tighter lending and ebbing confidence.

House sales plunged 34 percent year-on-year in May as mortgage borrowing slumped 40.4 percent from a year earlier, Spain's National Statistics Institute reported.

Spain had one of the euro zone's fastest growing real estate markets this decade and is being hit harder than any other large euro zone economy by 8-year-high mortgage interest rates and global credit restrictions.

Monday's figures added weight to chances of a significant correction in house prices in coming months, after they rose 2 percent in the second quarter, analysts said.

Ben May at Capital Economics in London forecast prices would fall 15 percent from their peak to the end of 2010.

"There is good reason to believe you could see sharper falls than that. Twenty, 25, even 30 percent falls are certainly not out of the question," May said.

Asking prices in estate agents' windows are a lot lower than a few months ago, and it will take time for official figures to reflect the speed at which the market is cooling, he added.