New Funds for Housing Loans

26 January 2018

Portuguese banks had 94.094 billion euros of housing loans in December. It’s the first increase since 2015 as the concession of new loans outpaced the repayment of existing mortgages.

According to data released by the European Central Bank, the stock of credit for home purchases held by banks amounted to 94.094 billion euros in December. That is eight million euros higher than the total for the previous month and represents the first monthly increase in the stock of housing loans since September 2015.

Outstanding loans rise in December

Although the increase is relatively limited, considering the total value of outstanding loans in Portugal, it contrasts with the overall downward trend since the financial crisis. At that time, the banks largely stopped lending, leading to a multi-year downward trend in the total stock of housing loans. The scenario is quite different today.

Banks are keen to inject liquidity into the market, while the strengthening economy and the improving the prospects for families are also leading those families to move ahead with loan-financed home purchases. The latest data provided by the Bank of Portugal indicate that in the first eleven months of 2017, banks made 7.441 billion euros in housing loans available. This amount exceeds the total amount of loans made available in 2016 for this purpose by more than 1.600 billion. The concession of housing loans has thus reached a high for the decade.

These developments have led to the increased stock of outstanding loans in December and may portend a new market trend.

Annual balance shrinks, but less

Despite the warnings that have arisen about possibly excessively loose lending criteria by the banks, the expectation is that households’ demand for credit will continue to increase. The latest survey of banks on the credit market signalled that outcome, with four of the top five financial institutions anticipating such an increase.

This is a scenario where banks are also struggling to lend home loans.

Original Story: Economia Online – Catarina Melo

Translation: Richard Turner