Bank customers can request to join the regime that fixes the repayment of a mortgage loan for two years and at a lower value than the current one.
This scheme is part of the measures approved by the government to mitigate the impact of housing loan costs, which have increased due to the increase in interest rates, as in Portugal the majority of housing loans have variable interest rates.
From this Thursday until the end of March 2024, bank customers can ask their bank for access to this mechanism, which concerns variable rate loans taken out until March 15, 2023 and whose repayment term is more than five years.
The banks then have 15 days to respond, including simulations of the normal term and the term with part of the deferred amount, the amount to be paid later and the repayment plan for the amount to be deferred. Customers then have 30 days to let the bank know whether or not they want to fix the term.
Banks may not charge commissions or costs for determining the provision, nor make its application dependent on the purchase of other products or services.
Anyone using this mechanism will have to pay a lower installment for two years, as the installment is indexed at 70% of the Euribor average for six months of the month preceding the customer’s request (which guarantees that he will term will pay less). two years than if Euribor were to be shown at 100%.
After these two years, the benefit will assume its ‘normal’ value in the following four years (whereby the then index is fully reflected). After these four years, families pay the remaining installments for the amount not paid while they enjoyed the above discount.
You can repay the deferred amount in advance without commission or costs. And access to this mechanism does not prevent customers from repaying the credit in advance (partially or fully) without penalty.
This Monday, Banco de Portugal said in a publication on the Bank Customer Portal that compliance with this regime implies that “the total amount of interest payable will always be higher”.
Deco/Proteste carried out simulations for Lusa in which it quantifies the increase in the total amount paid for credit when customers request access to pay the installment.
A loan of 150,000 euros with a term of 30 years, with a spread (bank commercial margin) of 1.25% and indexed to the six-month Euribor, has a current repayment of 831.09 euros and if you commit to moratorium, you pay 722.28 euros, which means you pay 108.82 euros less per month.
During the two years that the benefit is fixed, you will therefore pay 2,611.65 euros less. When you pay the ‘normal’ installment together with the deferred capital, the monthly amount is 850.87 euros.
In total credit, Deco/Proteste indicates that the additional cost in interest on the total contract for a customer with this credit to adhere to the moratorium is 3,082.13 euros.
The simulation assumes that interest rates will remain at current levels, meaning that if they fall, the increase in total lending will be lower and if they rise, the increase will be larger.
“It’s very useful for families with very high effort rates. It’s like an opportunity cost of having immediate liquidity”Deco/Proteste economist Nuno Rico told Lusa, adding however that for families who can afford the current installment “it does not justify participation in this mechanism as it entails higher overall costs”.
According to Banco de Portugal, at the end of 2022, banks had approximately 1.5 million home loan contracts in their portfolio (variable rate, fixed rate or mixed rate).
Source: DN
