Interest Rates on New Housing Loan Contracts Fall to Historic Lows

13 December 2017

The interest rate charged in Portugal on new home loans has fallen to a new low. The rate fell by three basis points to 1.53% in October, the lowest since 2004, according to data released by the Bank of Portugal (BdP).

In other words, Portuguese banks are charging less on new housing loans. The rate is, in fact, below the average for the eurozone this year. The average interest rate charged on new mortgages in the eurozone was 1.89% in October. At the end of 2016, the rate stood at 1.78%, slightly less than the rate charged at the time in Portugal.

In the last week’s Financial Stability Report, the central bank led by António Costa warned the Portuguese banks about the dangers of easing credit to too great an extent and mentioned the possibility of adopting measures that would serve hinder access to housing loans. The regulator said it wants to prevent banks from facing further problems with bad debts in the future.

Consumer credit increases

While residential mortgage loans have seen falling interest rates, consumer credit rates have risen again. In October, the average interest rate on new operations increased from 7.20% to 7.23%. Nevertheless, it is below the high of this year: 7.58% in February. These figures are above the average for the eurozone, where the average rate on new consumer credit does not exceed 5.59%.

The BdP also notes in the disclosed statistical information note that new lending for housing, consumption and other purposes totalled 706 million, 390 million and 156 million euros, respectively.

Original Story: Idealista

Translation: Richard Turner