The state guarantee for housing loans for young people is still awaiting the adoption of the necessary regulations to be implemented in practice and, according to a draft regulation to which Lusa had access, should be in force until the end of 2026.
At the beginning of August, relief from IMT and Stamp Duty (IS) on the purchase of a first permanent home came into force for young people aged under 35 at the date of purchase.
The measure of state guarantees allowing bank financing for the purchase of young people’s first home, included in the same government package (Construir Portugal) to facilitate access to housing, cannot yet be applied because, despite its decree, the law is in force and its application in practice requires regulation.
According to sources in the financial sector, the topic has not been developed further and is expected to be developed further only after August. They say it is necessary to agree from the outset with the Bank of Portugal how the measure will be integrated into banks’ compliance with macroprudential rules (an issue the regulator has warned about several times).
The decree-law on public housing guarantees was published on July 10, and it was already mentioned that the members of the government responsible for finance, housing and youth must approve the necessary provisions by September.
The guarantee is intended for people aged 18 to 35 years (inclusive), residing in Portugal, with a permanent status in the financial and social security sector, with an income of up to group 8 (€81,199 of annual taxable income) and who are purchasing their first permanent home, the value of which does not exceed €450,000. The beneficiaries cannot be the owners of a city building or part of a city building.
According to the draft regulation to which Lusa had access, the guarantee is valid for contracts signed before December 31, 2026, and will last for 10 years. The measure could be extended beyond 2026 after an impact assessment.
The loan must have a minimum repayment period of five years, and the government’s personal guarantee is “intended to enable the bank to finance the entire amount.”
Banks must comply with government guarantees so that their customers can benefit from the instrument. The bill also states that banks cannot charge fees or charges for the guarantee.
The draft regulation regulating the decree-law also states that the amount of the guarantee in each bank’s mortgage loan portfolio may be subject to revision, as well as increased or decreased by agreement of the parties.
While the details are unclear, this appears to indicate that each bank will have a “ceiling” on the amount of mortgage portfolio it can guarantee.
The state guarantee will ensure the repayment of capital in the event of default during the first 10 years of the loan agreement. If the client fails to repay the loan, the state “undertakes to reimburse up to 15% of this amount,” the draft resolution says.
When a guarantee is executed, the state has the corresponding rights that banks have, and banks must report on the steps taken to return the amounts executed by the state. The portion that banks receive in connection with the withdrawn guarantees must be returned to the state within the amount paid to it.
If the customer makes a partial early repayment of the financing, the state guarantee is reduced proportionally. If the customer sells the house, the state guarantee ends on that day.
According to the draft diploma, the General Inspectorate of Finance will conduct checks on the guaranteed amounts and possible activations of the guarantee.
Since the measure was introduced by the government, the Bank of Portugal has publicly warned several times that banks cannot facilitate compliance with the rules for granting this loan, even with a state guarantee.
According to Governor Mário Centeno, the Bank of Portugal always advocates measures that help the young population gain access to housing, but this measure requires “caution” to ensure that clients can repay their debt and that bank financing is stable.
According to Centeno, the state guarantee does not reduce the efforts that clients have to make, and he also considers it a risk if the amount of the loan issued increases due to the state guarantee.
“If the amount [do crédito] increases, and if income doesn’t increase, that means there’s a good chance people will exceed their debt service ratio” to income, he said in June.
In July, Finance Minister Miranda Sarmento told parliament that there were no disputes with the Bank of Portugal over state guarantees and that the regulation process was “always in agreement with the regulator.”
The current macroprudential rules state that the loan cannot exceed 90% of the value of the home (which for this purpose is considered the lower value between the purchase price and the appraised value) of the owned and permanent home. They also state that, as a rule, the client should not spend more than 50% of his income on renting the home to the bank (the so-called effort standard).
Last week, Santander Executive President Totta considered that state guarantees were positive, but they would have a very limited impact and would not solve the housing problem.
“We believe that the impact of this measure will be very limited,” Pedro Castro e Almeida said at a press conference dedicated to the bank’s half-year results.
The manager warned that it was necessary to “adjust expectations” because the measure “will not allow all young people to suddenly start buying housing”, but only those who are able to pay the bank in instalments, i.e. whose standard of effort is lower than that permitted by the banking supervisory authority.
“There are many countries in Europe that have taken similar measures and their impact has been less than 1% of loans issued. [A medida] “comes to the aid of young people who have the capacity to service their debt but lack the initial 10% to buy a home,” he said.
The president of Caixa Geral de Depósitos (CGD) praised the idea of a public guarantee at another press conference, but noted that details needed to be clarified.
“As you know, there are negotiations between the authorities on this matter, and Caixa will be here to finance these properties for all those who are in these conditions,” said Paulo Macedo.
As for the government, the Minister of Infrastructure and Housing said last week that he expected banks to contribute to the provision of a bank guarantee.
“Let’s hope that the banks [façam a sua parte]“since the bank guarantee provided for the component that the young people could not guarantee is also replaced by the government,” said Miguel Pinto Luz.
Author: Lusa
Source: CM Jornal
I’m Tifany Hawkins, a professional journalist with years of experience in news reporting. I currently work for a prominent news website and write articles for 24NewsReporters as an author. My primary focus is on economy-related stories, though I am also experienced in several other areas of journalism.