The renegotiation of loans for own and permanent housing up to 300 thousand euros, indexed to a variable Euribor rate, cannot lead to an increase in interest rates, if the effort rate exceeds 36%, due to the increase in interest rates compared to the foreseen in the contract, or when it increases by five percentage points in homologous terms, according to the government diploma approved yesterday in the Council of Ministers, which aims to facilitate the conditions for the reassessment of contracts in the light of the abrupt rise of Euribor. The six-month interest rate, the most widely used interest rate for buying a home, shot up to 2.225% yesterday, the highest value since 2009, the period of the subprime recession.
Negotiations could result in an extension of the credit term, a consolidation of it, a transfer to another bank or a reduction in the interest rate for a certain period, said Finance Minister João Nuno Mendes during the briefing of the Council of Ministers. In both cases, “interest rates cannot rise,” the official stressed. João Nuno Mendes also revealed that no commissions or stamp duties will be charged: “The aim is for this measure to take place at no cost to the customer”.
As for the extension of credit settlement terms, Nuno Mendes warned that “although it may make repayment easier, it means customers can pay higher interest at the end of the loan”. The government has therefore determined that after the temporary extension of the term, the client has five years to return to the original term.
For example, families who pay their own permanent home to the bank, with a loan of up to 300 thousand euros indexed to a variable Euribor, and who verify that the effort rate is more than 36% or has increased by five percentage points, can ask for renegotiate the contract to reduce the monthly weight of the installments. Likewise, banks should begin a review process to prevent these customers from defaulting.
If the effort rate exceeds 50%, that is, when more than half of households’ net income has to pay for housing or consumer loans, banks will be forced to revise the terms of the contracts. In other words, the renegotiation does not require an in-depth preliminary assessment compared to the same period or the start of the contract, explains João Nuno Mendes. Currently, banks are already required to negotiate credit when the effort rate reaches 50%, under the PARI – Action Plan for Default Risk.
From the entry into force of the diploma, banks have 45 days, ie until the end of the year, to conduct a survey of customers who default due to effort rates of more than 36% and must be negotiating target .
Banco de Portugal will monitor compliance with the new rules for revaluation of contracts included in the Legislative Decree. However, João Nuno Mendes pointed out that “this diploma does not only put the initiative with the bank”. “If the current customer understands that he is suffering a relevant financial degradation, he should go to the bank to start the process and the bank should give priority to these customers,” he explained.
As for the stigma attached to customers requesting credit restructuring, who for that reason may find it more difficult to access credit in the future, the Secretary of State has avoided the subject and played the card of responsibility: “We have to deal with the consequences. “The government understands that we have to act head-on in the face of the objectivity of difficulties. If anyone encounters difficulties, they must have an open path to renegotiate with the bank so that we can have a solution.”
Government suspends 0.5% fine on repayment of loans for own and permanent housing at a variable rate. The measures will be in effect until the end of 2023.
The exceptional renegotiation of the contracts will run until the end of 2023, as will the possibility of early repayment of the loan without the 0.5% penalty for floating-rate loans and regardless of the amount owed. Finance Minister João Nuno Mendes has announced that the commission’s suspension will only apply to loans for “own and permanent housing with variable interest rates”. “From the entry into force, there will be no payment of the fine for the write-off of the credit,” he added. “This measure improves the conditions for carrying out early repayments, allowing credit transfer, namely obtaining better credit conditions, or using savings available to households to reduce the debt burden,” the cabinet statement said.
Salomé Pinto is a journalist for Dinheiro Vivo
Source: DN
