Last July, when the Bank of Portugal's new restrictions on lending for both housing and consumer credit came into force, banks granted 34.8% more loans than in the same month last year. These figures suggest that the new rules are not currently having an impact on loans to households.
In the case of new home purchase loans, the volume exceeded €919 million, compared to €682 million financed in the same month last year (i.e., 34.8% more). This amount is slightly below the €990 million granted a month earlier, with this fluctuation being due to seasonal factors.
Credit at 2010 highs
The value of new operations in July was the second highest in 2018. In just seven months, banks have already lent €5.693 billion, which is as much money as in the whole of 2016 (when a total of €5.790 billion was lent). This means that new credit has reached 2010 highs, with 60% of all money lent by banks to individuals since the start of 2018 going towards home purchases.
The strong growth in new operations has led to an increase in the stock of mortgage loans. This is because, with interest rates in negative territory, repayments on existing loans ended up weighing more heavily than new financing in the total credit balance. But this trend is beginning to reverse.
The three limits set by Banco de Portugal that banks must follow when granting new credit to households:
- The household debt-to-income ratio (considering all loans) must not exceed 50% of disposable income;
- The amount of the mortgage loan cannot exceed 90% of the value of the home for owner-occupied housing and 80% of the value of the property for other purposes;
- The maximum term of the loan must be 40 years and converge to 30 years by 2022.
Source: Idealista