Mortgage Instalments Should Rise This Year (But Not by Much)

3 January 2018

Residential mortgage instalments have been declining in recent years, which has boosted the finances of the Portuguese families who borrowed money from the bank to buy a home. That scenario, however, is not expected to repeat itself this year, as analysts are forecasting a slight rise in monthly payments.

According to Lusa, which relies on calculations made by Deco/Dinheiro&Direitos, Euribor rates – the most common benchmark index used for housing loans in Portugal – may rise slightly, though they are expected to remain in negative territory. The slight increase will push home mortgage payments up to a small extent.

For Filipe Garcia, from IMF – Financial Markets Information, it is more likely that Euribor rates will rise in the second half of the year. That forecast is shared by João Lampreia, of Banco BIG. The analyst notes that Euribor is “conditional on ECB interest rates,” thus allowing for more significant variations in Euribor in the final months of 2018.

Experts predict that the Euribor rates will only emerge from negative territory at the end of the year, so the impact on household finances should be limited.

Trends in monthly mortgage payments in 2017

Comparing the monthly instalments paid at the beginning and end of 2017, considering a loan of 150,000 euros at 30 years, indexed to the 6-month Euribor with a spread of 1%, payments decreased by 3.78 euros: from 467.59 euros in January to 463.81 euros in December.

In the same scenario, but in the case of a three-month Euribor-indexed home loan, the instalment dropped 87 cents, from 461 euros in January to 460.13 euros in December.

The variation, according to Lusa, is much less significant than those recorded in previous years (2014-2016), when the monthly payments fell, in the same simulations, more than ten euros per year.

Original Story: Idealista

Translation: Richard Turner