Banks that adhere to the public guarantee on housing loans to young people will have a limit on the guaranteed amount they can lend, and may later request a reinforcement, according to the latest version of the ordinance to which Lusa had access.
According to the latest version of the ordinance, it will be up to the Minister of Finance to define the maximum amount of the public guarantee for housing loans that will be divided among the banks that sign the protocol with the State (only the adhering banks will be able to grant loans with a public guarantee).
However, if banks foresee “the possibility of exhausting the amount initially granted” they may ask the State for “an increase in the amount of the portfolio guarantee that was granted to them,” provided that it is duly justified.
The public guarantee for housing credit is not yet in practice because it lacks regulation, which should take a few more weeks.
According to sources in the banking sector, more and more customers are asking over the counter for the public guarantee and how they can benefit from it when they make simulations for home loans.
In July, when the public guarantee decree law was published to enable young first-time buyers to bank financing, it was mentioned that the Government had until early September to approve the necessary regulation.
However, the deadlines are slipping, and the Ministry of Finance is now adapting the legislation to incorporate the warnings issued by the Bank of Portugal.
When it presented the public guarantee measure, the Government (PSD/CDS-PP) said that the intention is for the State to guarantee up to 15% of the acquisition value of the property (functioning in this proportion as a guarantor) creating conditions for young people to be able to access a loan of up to 100% of the value of the house.
According to the decree-law, the guarantee is intended for people between 18 and 35 years of age (inclusive), residing in Portugal, with a regularised situation with the Tax and Social Security, with income up to the 8th bracket (81,199 euros of annual taxable income), and who are buying their first permanent home whose value does not exceed 450 thousand euros.
Since this measure was presented by the Government, the Bank of Portugal has publicly warned, several times, that banks cannot ease compliance with the rules for granting this credit even with the public guarantee.
The governor, Mário Centeno (former PS Finance Minister), explained that the Bank of Portugal always favours measures that help the younger population access housing, but “caution” is needed.
He went on to say:
“It is necessary to ensure the stability of the financial sector and to ensure that customers can pay the debt because the guarantee does not reduce the monthly effort and there is also the risk that the amount of the loan will increase due to the public guarantee, aggravating the customer’s financial circumstances.”
In July, the Minister of Finance, Miranda Sarmento, said in parliament that there are no disputes with the Bank of Portugal over the public guarantee and that the regulatory process takes place “always in consultation with the regulator.”
The macroprudential rules currently in force determine that the credit cannot exceed 90% of the value of the house (being, for this purpose, considered the lowest value between the acquisition value and the appraisal value) of own and permanent housing.
They also indicate that, as a rule, a customer should not spend more than 50% of their income on the mortgage payment to the bank (the so-called effort rate).
According to the draft ordinance, the guarantee is valid for contracts signed until the 31st of December 2026 and will have a term of 10 years.
The draft regulations also indicate that State guarantees granted by the State are exempt from guarantee commission and stamp duty.
Samantha Ganon
info at madeira-weekly.com
Original Article: Lusa
