Housing Credit: A Euphoric Year, But Expect More Calm in 2018 …

27 December 2017

The Portuguese continue to prefer to own rather than rent their homes. A loosening of credit by the banks has also contributed to a boom in residential mortgages. By the middle of this year, Portuguese banks had already lent more money for residential home loans than in all of 2014. The trend was confirmed at the end of this year, with financial institutions rolling out a red carpet for consumers.

2017 started with good news, as interest rates fell, taking mortgage instalment payments for variable rate mortgages down with them. Monthly payments reach six-year lows. The drops happened successively, month after month. In March, for example, Mario Draghi, the president of the European Central Bank (ECB), suggested that households would have two more years (by 2019) of low rates for housing loans. Families continued to see interest rates fall. In fact, payments to banks have dropped by 50% since the Troika came to Portugal.

The “war” over the banks’ spreads has also continued, with banks lowering them continuously. Bankinter is currently the bank with the lowest profit margin in the market, but there’s also Bank CTT, which allows you to apply for bank financing through your smartphone! By renegotiating spreads, instalments can fall even further, and by significant amounts.

More news is expected for 2018, as banks will have new – and tighter – rules for residential mortgage lending.

At the end of this year, the Bank of Portugal (BdP) left a warning, threatening to put a brake on the concession of housing loans. “Price developments in the real estate market may pose risks to financial stability as they lead to a relaxation of the criteria for the concession of housing loans in a context of high household indebtedness,” the regulator stated.

Story: Idealista

Original Translation: Richard Turner