The stress test should lower barriers to getting a mortgage, says the bank.

A recommendation by the Portuguese Bank (BdP) that reduces the stress test from 3% to 1.5% for banks when granting a mortgage loan for the purchase of a home has come into force. This change is welcomed by the Association of Portuguese Banks (APB), which believes that this recommendation facilitates access to mortgage credit in Portugal.

An instruction from banking regulators and supervisors went into effect today (Oct. 16) that lowers the stress test recommendation for mortgages that simulate an interest rate hike from 3% to 1.5%.

According to an APB spokesperson, lowering this restriction makes it easier for families with presumably stable conditions to access credit because it removes a restriction that had lost its validity due to significant interest rate increases since last year.

Until now, when a customer wanted to take out a mortgage loan, the bank had to model what would be the level of financial stress for the customer in the event of a 3% increase in the Euribor rate, and in this test the customer must not spend more than 50% of their income on the monthly payment.

At the moment, with a 12-month Euribor rate of 4%, the stress test sets the modeled interest rate at 7%, which means considerable financial effort and, according to reports from bank customers, prevents many from getting a new home loan or transferring existing loans to other banks.

Under the new rule, for a loan longer than 10 years (mostly mortgage loans), the stress test will model a 1.5% increase in interest rates instead of 3%.

Also in early October, the head of the Portuguese Bank said that the new rule does not change the maximum financial strain, which remains at 50%. That is, a family should not spend more than half of its income on loan repayments.

Portugal is facing a worsening crisis in the housing market. The State Budget for 2024 (OE2024), presented in Parliament last week, includes several measures aimed at those with mortgages or in need of rental housing (support for rent payments, favorable interest on the loan, fixing loan payments for two years, increasing public housing, etc.).

However, these measures have drawn criticism from both opposition parties and civil society organizations associated with the right to housing.

Access to housing through a bank loan has deteriorated since 2020 due to high housing costs and rising interest rates, according to a recent Portuguese Bank study.