Interest rates on new home loans fall for the fourth month in a row in January

The average interest rate on new home lending transactions fell for the fourth month in a row in January to 4.03%, although it remains above the annual value, the Bank of Portugal (BdP) reported this Monday.

Banking supervisory data shows that the average interest rate on new home lending transactions rose from 3.3% in January 2023 to a high of 4.27% in September 2023.

Starting in September, it began to decline and ended the year at 4.12%.

Despite the successive falls, the rate remained above the European average, which rose from 4.0% in December to 3.87% in January.

By negotiation type, the average interest rate on new home loan agreements fell 0.18 percentage points in January from December to 3.81%, marking the third consecutive month of declines.

In turn, the average interest rate on revised contracts remained at 4.39% compared to December.

Blended rate continued to be the dominant form of new mortgage origination in January, accounting for 70.8% of the total, compared with 24.7% for variable rate and 4.5% for fixed rate.

The average monthly payment increased to €426 in January, up from €425 in the previous month and €344 in the same month in 2023, according to BdP.

Data released today by the banking regulator also added that the six-month Euribor rate returned in January and represents the largest share of the “stock” of permanent home loans with variable rates.

In January, the six-month Euribor rate was 36.4% of the total, beating the 12-month Euribor rate (35.7%) and remaining far behind the three-month Euribor rate (24.4%).

As for early repayment of housing loans, in January they amounted to 1.29% of shares. Despite this, the depreciation weight “was the second highest since the start of the statistical series in December 2021.”

The total volume of early repayments, including contracts concluded by repaying the debtor’s debt, consolidating a loan in a new contract and transferring a loan to another institution, amounted to 87% of early repayments in the analyzed month.

In consumer lending, the average new business rate reached 9.44% in January, the highest since February 2014, versus 8.45% year-on-year.

For loans for other purposes, the average interest rate was 5.31%, compared to 5.20% in December.

As for companies, the volume of new lending transactions in January amounted to 1.915 million euros, which is 625 million euros less than last year and 800 million euros less than in December.

New contracts accounted for 75% of new transactions, with renegotiations accounting for the remaining 25%.

For companies, the average interest rate on new loan transactions decreased by 0.09 percentage points compared to December, to 5.67%, versus 4.69% a year earlier.