The escalation of variable interest rates, indexed to the Euribor, has put pressure on the budgets of households with mortgage loans, as 90% of loans were taken out at this type of interest rate. In July, the average term of new contracts signed in the past 12 months rose in one year by EUR 207, which translates into an increase of 54.8%, from EUR 378 to EUR 585, the highest value since January 2009, at the beginning of from the National Institute of Statistics (INE) series, according to Dinheiro Vivo calculations based on the report published this Thursday.
It is recent loans, taken out in the past year, that suffer the most from the fall in interest rates. For example, the impact on old contracts with a term of more than 10 years is minor, because a large part of the capital has already been written off. For example, the average payment of all loans in July showed a smaller year-on-year increase of 106 euros or 40.2%, going from 264 euros per month to 370 euros, but still a new record of the INE statistical series.
In particular, by analyzing the average monthly variation of these contracts, which has risen to 585 euros, the implied interest rates, which stood at 0.964% in July 2022, increased by 2.751 percentage points last month to 3.715%, the highest figure since September 2014 . when the country nursed wounds from the troika rescue. Worldwide, and taking into account the average interest rate on all contracts, new and old, interest rates rose on average by 2.93 percentage points, from 0.928% to 3.858%, a maximum since April 2009.
The high interest rates are due to variable indices, the most common in mortgage lending in Portugal, which are affected by the rise in the European Central Bank’s (ECB) benchmark interest rate. It should be remembered that in July the institution led by Christine Lagarde again deteriorated this indicator by 0.25 percentage point and brought it to a new maximum: 4.25%. In September, the Euro Supervisory Committee may decide on a further increase to reduce average inflation in the single currency bloc to 2%. The price index has been cooling for three months in a row, but is still at 5.3%, well above the target of 2%, according to the latest Eurostat data for July. Euribor rates, namely the 12-month interest rate, currently the most widely used index for residential mortgages, confirmed the tenth consecutive ECB fine in September and should continue the upward spiral.
Interest already weighs on average for more than 65% in the monthly depreciation. Last year they were worth just over a quarter or 25.7% of the mortgage loan.
If in July last year the interest rate weighed on average just over a quarter, namely 25.7% or 97 euros, in the term of 378 euros of contracts signed in the last 12 months, it now corresponds to more than 65% or 381 euros of the monthly fee of 585 euros. Conversely, the amount of depreciated capital has decreased. A year ago, 74.33% or 281 euros of the installment, at 378 euros, corresponded to the effective payment of the debt. Currently only 34.87% or 204 euros of the 585 euros correspond to amortized capital. This means that borrowers pay more to the bank, but pay less debt.
The scenario is the same for the average terms of all contracts. In July last year, of the average monthly fee of EUR 264, only 17.42% or EUR 46 corresponded to interest. Currently, more than half (55.13%) or 204 euros of the installment, 370 euros, is used to pay fees. The payment of the effective debt also had an opposite trajectory. In July 2022, 82.58% or 218 euros of the average monthly fee, of 264 euros, was used to write off capital, an amount that fell significantly to about half (44.86%) in July this year. That is, of the 370 euros that households pay to the bank on average, only 166 euros were channeled to reduce the amount owed.
In July, taking into account all contracts, borrowers owed an average of EUR 63,555, an amount that increased by EUR 3,494 compared to the same period last year, the highest amount in the last 14 years, i.e. since 2009. , the average capital The outstanding amount last month amounted to 124 986 euros, which corresponds to an increase of 3502 compared to a year ago, but a decrease compared to the previous months. Between November 2022 and June 2023, the average outstanding capital for these loans always exceeded 125 thousand euros.
Salomé Pinto is a journalist for Dinheiro Vivo
Source: DN
