Low family wages are ordering fewer home loans

Those with incomes of less than 2 thousand euros are the most interested, making up 41% of bank loan applications to the idealist/credit-habitat in the summer of 2023, as the published report shows. They are followed by families earning between 2 and 4 thousand euros a month, who make up 34% of applications. However, high interest does not translate into the same level of transactions, especially among low-income families.

Families earning less than 2 thousand euros accounted for just 9% of the total number of mortgage deals concluded between July and September 2023. This is significantly less than a year earlier (third quarter of 2022), when low-income families made up 32% of the total number of mortgages arranged. And it is also much lower than the previous quarter (when they made up 23% of''solvency. This reality changed on October 16 with the decision of the Portuguese Bank (BdP) to lower the simulated interest rate hike from 3% to 1.5%, which presumably will ease access to credit;

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What are the characteristics of new mortgages?

The low number of originated mortgages among low-income families may explain the profile of originated loans in the third quarter of 2023, which is characterized as follows:

• The average family income amounted to €5,657 per month, higher than the average wage a year earlier (+11%) and compared to the previous quarter (+17%);
• the average purchase price of a house amounted to 261,821 euros, up 1%''more than in the third quarter of 2022. Compared to the second quarter of 2023, the average value increased by 26%;
• The average value of mortgages concluded amounted to €171,435, down 2% from a year earlier but 22% higher than in the previous quarter.

Therefore, since there were fewer low-income families (less than 2 thousand euros per month) taking out mortgages in the summer of 2023, we can conclude that those who take out loans have more purchasing power and can therefore afford to buy more expensive homes, borrow a higher amount or save more equity for a down payment on a mortgage. It is also worth noting that "the share of fixed-rate loans is increasing by''compared to variable rate loans, accounting for 52% of the total, up from 28% in the third quarter of 2022,' the report points out. This is because 'the stability offered by mixed/fixed rates makes many customers defensive, given the uncertainty of the market', besides, 'there are mixed/fixed rate offers that are cheaper than variable rate offers at the beginning of the mortgage loan', as Miguel Cabrita, in charge of idealist/credithubbing in Portugal, explained in an interview.

There were also other changes noticed in the conclusion of mortgages in the third quarter of 2023. First of all, the purchase of primary residences continues to account for the majority of the concluded''transactions (almost 40%), but is no longer the majority.