Home Lending Accelerated Once Again to Almost €10 Billion in 2018

12 February 2019

Bank lending for home purchases reached 9.835 billion euros last year, the Bank of Portugal announced, the highest level since 2010.

According to the entity led by Carlos Costa, Portuguese banks granted 903 million euros in housing loans in December. The figure was the highest level for the last five months and pushed total lending for home purchases in the year to 9.835 billion euros.

Home lending reached the highest amount for the year since 2010, the year before Portugal’s request for a rescue package, and signals a sustained increase in the concession of home loans. The total amount of housing loans granted in 2018 is equal to an increase of 19% over the previous year.

The increase also suggests that the Bank of Portugal’s macro-prudential measures, which were introduced to stanch the growth of mortgage lending, may not be having their desired effects. The Bank of Portugal’s measures, which entered into effect at the beginning of July, were designed to prevent the country’s banks from lending to individuals who may not be able to afford the mortgage repayments over the entire life of the loan.

Home lending accelerates to new high

Like housing, consumer loans also grew again last year. Banks granted 4.66 billion euros in such loans in 2018, 10% more than the previous year and the highest amount in 14 years.

As regards loans for other purposes, the trend is different. Portuguese banks granted 1.823 billion euros for this purpose in 2018, 7% less than in 2017, and the lowest annual amount on record (the BdP began compiling the data on lending January 2003).

Overall, households have taken out more than 16 billion euros in loans from banks in the last year. The total amount reached €16.318 billion, the highest since 2010 and an increase of 13% y-o-y.

Corporate lending also rises

Last year also saw an acceleration in lending to businesses. Portugal’s banks granted 31.59 billion euros in loans to companies, 9.5% more than in 2017. That year corporate lending reached its lowest point since at least 2003.

In 2018, the largest share of corporate lending went to smaller companies (up to one million euros): 17.661 billion euros. Large companies borrowed a total of 13.929 billion euros.

Original Story: Economia Online – Catarina Melo

Translation and editing: Richard Turner