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Average Outstanding Capital for Housing Loans Falls

17 March 2018

The average residential mortgage loan holder owed 51,680 euros to their lender last December. In February of 2011, the figure stood at 56,028 euros.

The data were disclosed in a study by an economist at the Department of Strategy and Studies at the Ministry of the Economy. Rita Tavares da Silva’s paper “The recovery of mortgage credit” reveals that from February 2011 to April of last year, the average outstanding capital with respect to mortgage loans fell continuously (from 56,028 euros in February 2011 to 51,512 in April last year).

However, since May, the “trend has reversed, and the average outstanding capital has been increasing,” reaching 51,690 euros in December.

The study, which was promoted by the Ministry of Economy and published in the Portuguese Economy Monthly Bulletin, also stated that “banking valuations for housing have seen a similar trend to that of mortgages, though assessments have been steadily growing for the last three years.”

In December 2017, bank assessments valued the average square meter at 1,150 euros, the highest since June 2011 and 17.2% more than the low registered in March (981 euros/m2).

Ms da Silva noted that “when bank assessments increase, those banks are willing to loan higher amounts since the underlying mortgage security is worth more. The higher valuations also reflect the property’s market value, which, when it goes up, may also lead to an increase in the respective housing loans and, consequently, an increase in the average outstanding capital with respect to mortgage loans.”

The economist also believes that the higher mortgage lending has also had an impact on the increase in the average loan size.

2017 also saw the highest number of new loans for home purchases since 2010, when financial institutions granted 8.259 billion euros in new loans.

New housing loans have been increasing since 2013.

Nevertheless, the total stock of housing loans granted by the banks continued to decline in 2017, reaching 93.216 billion euros, the lowest figure since February 2007, which the study said was due to “the fact that the growth of new loans is still being outpaced by loan repayments from previous years.”

Nevertheless, the difference is decreasing, “with the annual rate of change going from -3.7% in November 2016 to -1.2% in December 2017.”

Original Story: Diário Imobiliário / Lusa

Translation: Richard Turner