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Demand for housing credit cools despite lower spreads



High interest rates continue to deter families from taking out housing loans in Portugal, even though banks have been offering lower spreads. The Bank of Portugal (BdP) itself says this, which revealed that at the end of 2023 there was once again a “slight decrease in demand for loans for housing acquisition”, also due to consumer confidence and the prospects for the housing market. housing.

With regard to housing credit, the most recent Survey of Banks on the Credit Market by the Bank of Portugal (BdP), relating to the last quarter of 2023, reveals that the “heterogeneous assessment by banks resulted in a slight decrease in demand of loans for housing acquisition”, reads the document published this Tuesday, January 23rd.


And what justifies this decline in demand for housing credit? “The general level of interest rates and, to a lesser extent, consumer confidence and the outlook for the housing market contributed to reducing demand in the housing segment, which was slightly mitigated by the increase in refinancing and debt renegotiation needs ”, explains the regulator led by Mário Centeno.


As for the offer, the BdP says that there have been no changes to the criteria for granting credit for purchasing a home – and the expectation is that this will continue. As regards credit conditions, there were changes at the end of 2023: there was a “slight decrease in the spread” on home loans, especially on medium risk ones. It's because? “In credit to individuals for the purchase of housing, competition from other banking institutions contributed to reducing spreads”, he further explained.

But will banks continue to lower spreads? The expectation shared by the BdP indicates that, in the next 12 months, there is expected to be a “slight increase in spreads on loans to SMEs and individuals for housing and consumption”. It should be noted that Euribor rates are also showing signs of falling, giving banks room to increase their profit margins a little.

What the BdP also says is that in the last six months, the non-performing credit ratios and other banks' credit quality indicators had a “slight contribution to making the terms and conditions in housing credit less restrictive, resulting from lower pressures associated with regulatory or prudential requirements”. And it is expected that this will continue, at least, until June 2024.


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Source: Idealista


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