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  • Writer's pictureCarolina Gonçalves

Banks believe that access to credit will be facilitated through stress test relief

Experts believe that the Bank of Portugal's recommendation to relax the pressure test that banks carry out on customers facilitates access to mortgage credit.

On October 16th, the instruction of the banking regulator and supervisor came into force that reduces the recommendation of the stress test applied to housing loans, changing the simulation of an increase in the interest rate from 3% to 1.5%.

According to the Portuguese Association of Banks, this measure aims to facilitate access to credit for families with apparently sustainable conditions, as it alleviates a constraint that, with the high rise in interest rates, is no longer justified.

Experts in financial matters also reveal some hope that this change will allow greater access to credit, particularly in the case of households that, despite meeting the recommended effort rates, saw their loans refused due to the high levels of interest rates (above 7%) considered in the analysis.

Until now, when a customer wanted to take out a mortgage, the bank had to simulate what the customer's effort rate would be if the Euribor rate rose another 3%, and in this test the customer's monthly installment could not be higher than 50% of their income.

In the current situation, with the 12-month Euribor rate at 4%, the stress test puts the simulated interest rate at 7%, a value that would translate into a great effort and, according to reports from bank customers, has prevented many from accessing new credit to buy a house or even transfer existing credits to other banking entities.

With this change, for a loan lasting more than 10 years (usually a home or mortgage loan), the stress test now simulates an interest rate increase of 1.5% instead of 3%.

Experts also explain that, in practice, the new rule also means an increase in the maximum amount of loan that banks can grant for home purchases.

This will apply both to new contracts and to credit transfers to other institutions.

It should be noted that, despite the relief, there should be rigor in the assessment of the consumer's financial capacity, rejecting a facility for banks in this analysis.

Portugal is currently facing a worsening housing crisis. The State Budget for 2024, delivered in early October in parliament, provides for several measures aimed at those who have a mortgage or have to rent a house (support for the payment of rents, subsidized interest on credit, fixing the loan installment for two years, strengthening the public housing stock, etc.).

Access to housing through bank credit has been worsening in recent years due to high house prices and rising interest rates, according to a study recently released by the Bank of Portugal.

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