Bank clients can apply to join the regime that fixes installments on a mortgage loan for two years and for a smaller amount than the current one.
This regime is part of measures approved by the government to mitigate the impact of housing loan costs, which are rising due to rising interest rates, since in Portugal most housing loans are issued at variable rates.
From this Thursday until the end of March 2024, bank customers can request from their bank access to this facility, which applies to variable rate loans issued before March 15, 2023 and with a maturity of more than five years.
Banks then have 15 days to respond, including modeling a “regular” payment and a payment with a portion of the amount deferred, an amount due later, and a repayment plan for the amount to be deferred. Customers will then have 30 days to tell the bank whether they want a fixed payment amount.
Banks may not charge fees or charges for fixing a provision or make its application conditional on the award of a contract for other products or services.
Anyone accessing this facility will have to pay a lower fee over two years, as this fee will be indexed to 70% of the six-month average Euribor amount of the month preceding the client’s request (ensuring that they will pay less over the course of two years than if the Euribor rate had been reflected at 100%).
After these two years, in the next four years, the benefit takes on its “normal” value (with a full reflection of the index at that time). After these four years, families will pay the remaining premiums for the amount outstanding while they took advantage of the above reduction.
The deferred amount can be repaid ahead of schedule, without any commissions or fees. And access to this mechanism also does not prevent clients from repaying the loan early (in part or in full) without penalties.
This Monday, in a publication on the bank’s client portal, Banco de Portugal stated that compliance with this regime implies that “the total amount of interest paid will always be higher.”
Deco/Proteste conducted a simulation for Lusa that quantified the increase in the total amount paid on a loan when customers request access to correct a payment.
A loan of 150 thousand euros for 30 years with a spread (commercial bank margin) of 1.25% and indexed to the six-month Euribor has a current installment of 831.09 euros, and if you comply with the moratorium you will pay 722.28 euros, then there you will pay 108.82 euros less per month.
Thus, over two years of establishing benefits, you will pay 2,611.65 euros less. When you start paying the “regular” contribution along with the deferred capital, the monthly payment will be €850.87.
In the total amount of the loan, Deco/Proteste indicates that the additional costs in the form of interest under the general agreement for the client with this loan for compliance with the moratorium amount to 3,082.13 euros.
The modeling 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.
“This is very useful for very high-pressure families. This is similar to the opportunity cost of obtaining immediate liquidity,” Deco/Proteste economist Nuno Rico told Lusa, adding, however, that for families who can pay current expenses, “it is not justifiable to commit to this mechanism, since in general it leads to increased costs.” .
According to Banco de Portugal, at the end of 2022, banks had about 1.5 million mortgage lending agreements (variable rate, fixed rate or mixed rate) in their portfolio.
Author: Lusa
Source: CM Jornal
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