'Tax rates are vital in mortgages - 55% in new contracts.' | Blog

'Tax rates are vital in mortgages - 55% in new contracts.'

'published on Thursday, November 2. This is the highest amount lent by banks in the last 15 years and to find a higher amount you have to go back to October 2007 (1.875 billion euros).

This means that demand for home loans in Portugal is picking up despite rising interest rates and an unstable economic situation. In addition, BdP reported that "the average interest rate on new home loans rose slightly, from 4.23% in August to 4.26% in September. "

All indications are that interest rates will continue to rise as the European Central Bank (ECB) maintains its tight monetary policy without changing the funding interest rate, which at 4.5% is the highest since 2001.''And the ECB does not rule out the possibility of further interest rate rises.

What could be behind the rise in new home loans? It is becoming clear that demand for loans to buy a home is changing, with families increasingly opting for blended rates.

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This is because "strong competition between banks leads to the fact that at the moment there are home loan offers with mixed interest rates below 4%, which are more attractive to families," explains Miguel Cabrita, in charge of ideal/créditohabitação in Portugal.

"In September, new mixed-rate housing loans (that is, loans with a fixed interest rate at the beginning of the contract, followed by a period with a variable''interest rate) accounted for 55% of the total number of new loans [for permanent housing]," the Mariu Centeno-led regulator also reported.

The history of new housing loans shows that the preference for blended rates began in October 2022, and the most significant increase was seen from June this year, when blended rates began to account for almost 30% of all new contracts, still below variable rate loans (62%). But it was in August and September that a sharp jump occurred, with the share of mixed rate loans becoming the dominant share of new housing loans in Portugal.

Also during this period, new housing loans rose to 1.729 billion euros in August and 1.87 billion euros in''September. The data shows that blended rates, which are better available than variable rates, have given a new lease of life to home loans as they are more attractive to families at a time when housing payments are on the rise.

It is understood that "the average monthly payment for a home loan increased by six euros in September to 413 euros," an increase in line with what it was in August, BdP reported. Compared to September 2022, the average monthly payment increased by €109.