Customers who renegotiated their loan terms after March can also set up an installment plan.

Customers who renegotiated the terms of their mortgages after March this year can join the regime, which sets the loan installment for two years, Lusa Banco de Portugal said.

From last Thursday, November 2, until the end of March 2024, bank customers with a loan to purchase or build their own permanent home can apply to join the regime, which fixes the monthly contribution to the bank for two years and below the current value. This mechanism applies to floating rate loans issued before March 15, 2023 and whose repayment period exceeds five years.

Lusa asked the Bank of Portugal whether clients with pre-existing contracts but whose negotiations were renegotiated after this date could join, asking the banking regulator and supervisor that they were included, yes, whether negotiations were initiated by the client or the bank.

“If the terms of the loan agreement are renegotiated (i.e. changes are made to the relevant terms, for example, extending the repayment period or defining a grace period for capital and/or interest), rather than entering into a new agreement (which happens, for example, in debt refinancing or consolidation loan), the fact that the agreement was concluded after March 15, 2023 does not prevent access to this measure,” he responded to the Bank of Portugal.

The institution, headed by Mario Centeno, added that, as the law states, those who cannot join this regime are clients in default or in a situation of insolvency, or who are already subject to the PARI regime (plan of action for the risk of default ) or out-of-court procedure for resolving non-compliance situations (PERSI).

In this mechanism, clients pay a lower fee over two years, since this fee will be indexed to 70% of the average Euribor amount for the six months of the month preceding the client’s request (which ensures that they pay less over two years than if the Euribor reflected 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.

In a publication available on the bank’s client portal, Banco de Portugal explains that membership means that “the total amount of interest paid will always be higher.”

Deco/Proteste carried out a simulation for Lusa that quantified the increase in the total amount paid on the loan.

For example, a loan of 150 thousand euros for 30 years with a spread (the bank’s commercial margin) of 1.25% and indexed to the six-month Euribor rate has a current contribution of 831.09 euros and, subject to the moratorium, will become a payment. 722.28 euros, that is, 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.

“It’s very rewarding for families who are putting in a lot of effort. 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 payments, “it does not justify committing to this mechanism, since overall it increases costs “

At the end of 2022, according to Banco de Portugal, 1.5 million housing loan agreements were concluded.