Banks slightly tighten mortgage lending: since August, loan repayments capped at 45% of income. No change expected this year
Banks in Portugal slightly tightened their criteria for approving mortgages in July–September, according to a survey of banks published by Banco de Portugal (the Bank of Portugal) on 27 October (ECO).
One of the reasons is a rule set by the Bank of Portugal itself: since the beginning of August, repayments on all of a borrower's loans, including the new one, must not exceed 45% of their income; the limit used to be 50%. The banks themselves say this rule has had only a small effect (Jornal de Negócios). Other reasons are the banks' expectations for the housing market and prices, borrowers' creditworthiness, and how much risk each bank is prepared to take on. At the same time, the terms offered on loans eased slightly, and the share of applications refused did not change (Jornal Económico).
Demand for mortgages fell slightly in July–September because of higher interest rates. Banks expect it to fall a little further by the end of the year, and they do not plan to change their conditions for private customers (Jornal Económico).
The European Central Bank has already raised interest rates twice this year. This week they are expected to stay where they are, but markets expect another rise in December. ECB rates drive Euribor, the rate to which repayments on variable-rate mortgages are linked (ECO).
Total mortgage debt is still growing: at the end of September it reached €120.2 billion — €1.117 billion more than in August and 11.2% more than a year earlier (Notícias ao Minuto).
