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Mortgage credit: February brings the first reductions in payments to the bank since a year ago.

If you have a mortgage loan, February will bring you, for the first time since April 2021, a downward but still slight contract review. However, this drop in installments will only be felt by those who have contracts with maturities of 3 and 6 months and will not yet be reflected in 12-month contracts, which will still suffer a slight worsening but with good news: “If this continues trend, it would have been the last month of increase. In March, there will already be a decrease in the value of housing credit”, said Nuno Rico, specialist at DECO PROTeste.

“The downward trend that began three months ago, with the November averages, continues, despite being very slight. It was higher in the 12-month Euribor, with the rate falling by 63 thousandths, while in the 3-month Euribor it only fell by 6 thousandths. However, this is the third month in a row – with the exception of the 3-month Euribor – that has fallen globally”, highlighted the economist contacted by ‘Executive Digest’.

But let's look at the numbers:

Let's take as an example a loan of 150 thousand euros for 30 years, with a spread (bank's commercial margin) of 1%:

– if the loan is indexed by the 12-month Euribor: the installment you will pay next year will rise to 770 euros, plus 25 euros (3.35%) in relation to the installment you paid in the last 12 months (745 euros) . The average rate recorded this month – data up to January 26th – was 3.616%.

– If the index is for 6 months, be prepared to hand over 796 euros to the bank, a drop of 0.5% (around 4 euros) compared to August 2023, when the installment was 800 euros. The average rate stood at 3.899%.

– finally, if you have a 3-month contract: the average Euribor rate is 3.929%, which means a reduction in your installment of 0.49%: it drops from 802 to 798 euros, minus 4 euros.

“There continues to be an inversion of values”, pointed out Nuno Rico. “This is a sign that the market’s perspective is that this decline will continue and that, within a year, values will be lower than they are currently.”

“Despite there being reductions, benefit levels remain very high”, warns expert

However, the good news is the reduction in payments, said the expert. “I want to highlight this important news: for the first time since February 2022, we have downward revisions to installments, in the case of Euribor at 3 and 6 months. With very slight declines, it is a fact, but for the first time the performance will be revised downwards.”

A scenario that promises to gain momentum in the coming months. “The ECB (European Central Bank) has signaled that it will maintain these restrictive rates for a while longer, and there are still some concerns about inflation in some European economies, but everything indicates that the peak will have already passed and we will be seeing the light in the future. bottom of the tunnel”, he said.

The Portuguese will feel some relief in the performance, yes, but it is still too early to celebrate, stressed Nuno Rico. “We have not yet felt a relief in requests for help from DECO, the numbers remain at the level of the end of 2023, for two reasons.

Firstly, despite these reductions already being made, benefit levels remain very high. In the case of 12-month Euribor, whoever sees their contract revised in February will still mean a small increase. It will take some time for families to begin to feel this relief. Secondly, we have the issue of the cost of living remaining high. Despite the reduction in inflation, families continue to have very tight budgets. I would probably venture that by the end of the first trimester we won’t feel that relief.”

Could this more favorable scenario for the Portuguese wallet cause an increase in demand for buying a house? Nuno Rico left advice. “There is this fear, but it is important to leave this message to consumers: real estate prices remain very high. The correction in terms of prices has not yet happened, there is a slowdown in price developments but there has not yet been a decline, when compared to a few years ago but also in terms of Portuguese income”, he pointed out.

“Along with a scenario of a slight increase in unemployment, I would say that the economic prospects we are talking about will not be the most optimistic. We are in an electoral scenario, we don't know what will happen from March 10th, so there is no favorable context”, said the expert.

“That's why the advice we've been giving consumers is along the same lines: it's necessary to carefully assess the family's financial condition, stability and income level, try to find a property that fits the effort rate, which is very difficult. , and always carefully consider the issue of purchasing, since what we may experience in the coming months or years is a period of decline, always very gradual”, he warned.

Because, he concluded, “it is very unlikely that a return to negative interest rates will happen again. It was an exceptional period and one that will hardly be repeated.”

Read full article here.

By Francisco Laranjeira



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