The public guarantee will allow young people up to the age of 35 to have access to a 100% mortgage loan. However, although the measure is already in force, banks are still waiting for the government to regulate it in order to know how to act, a law that should be known by September 9th.
For now, the leaders of the largest banks operating in Portugal warn that the public guarantee will cause mortgage payments to rise, which will mean that only young people with higher incomes will be able to benefit from this support.
On July 10th, the decree-law that establishes the conditions under which the State can provide a public guarantee, enabling the granting of 100% mortgage loans to young people, was published in the Official Gazette. However, the regulation of this measure is still to be known, an essential document for banks to know how to apply the support in practice.
And there is still no news in this regard, since the Ministry of Finance continues to exchange technical opinions on the measure with the Bank of Portugal (BdP) and the Portuguese Banking Association (APB), at a time when half of the deadline established to draw up the rules for the public guarantee (90 days) has already passed. If the deadline is met, the regulations for the public guarantee for home loans will be known by September 9.
Bankers warn that public guarantee will benefit young people with higher salaries
Although the rules of the public guarantee are not yet fully known, its general outlines are already known, criteria that are also in line with the recommendations of the Bank of Portugal:
Public guarantee for housing loans: intended for young people up to the age of 35 (inclusive), who do not own their own homes and are tax resident in Portugal, whose income does not exceed the 8th IRS bracket (around 81 thousand euros). The maximum house price limit is 450 thousand euros, with a 15% guarantee;
BdP rules for granting home loans: the financing limit is 90% for permanent, owned homes. The maximum effort rate is 50%, meaning that the house payments cannot represent more than half of the family's income.
By crossing these rules, Portuguese bankers warn that, by granting a 100% mortgage loan (instead of 90% or 80%), young people will pay much higher mortgage payments, since they have to comply with the limits of the effort rate and also the loan maturities. And for this reason they admit that only young people with higher incomes (close to 80 thousand euros per year) will be able to benefit from this scheme. Therefore, the impact of the measure for young people with lower salaries will be limited, not solving the problem of access to housing.
“We must not forget that people will pay 100% of the credit, not 85% or 90%, so the issue of the effort rate will be at stake. It is important to understand that it will be a little more restrictive, in terms of income, to who can access this credit”, explains João Pedro Oliveira e Costa, executive chairman of BPI, concluding that the measure is “for a niche market”.
Pedro Castro e Almeida, CEO of Santander, also states that “the impact of this measure will be very limited”, admitting that it will only “help young people who have the capacity to service the debt”. It is in this context that Paulo Macedo, executive chairman of Caixa Geral de Depósitos, says that it is necessary to know “how this [public guarantee] will affect the maintenance of the effort rates and maximum maturities”, cites the same newspaper in this publication.
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Source: Idealista
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