Acceleration of the movement of bank customers without the consumption commission

“Change your home loan without paying for it”, “Convert for a year” or “Come Millennium and bring your home loan with you”. Banks are investing in several campaigns to attract clients from other financial institutions, while the Portuguese are also becoming more willing to change and look for better conditions, as is the case in other services. Suspension of the early repayment commission helps combat the inertia of households with mortgages, which, says Deco, promotes greater mobility for bank customers.

While consumers in energy services easily change suppliers, the same does not happen in telecommunications, which always requires a loyalty period. In the banking sector, this obstacle does not exist, but there is another: the costs of making a credit transfer. Both the commission for early repayment of old credit and the commissions associated with obtaining new financing (opening process, evaluation, among others).

“There is some inertia among people. They even want to change banks very often, but the truth is that they realize that it is difficult because it requires knowing the market well, the terminology and the information provided by credit institutions, and it is not always easy for the average consumer,” says Natalia Nunes. “Above all, because there are costs,” Coordinator of Deco’s Financial Protection Office, told Jornal Económico (JE).

Since October 2022, fees are no longer a barrier. The government of António Costa allowed the temporary suspension of the early amortization commission for housing loans with a variable interest rate of 0.5% on the total amount owed, “so that this does not constitute an obstacle to the renegotiation of credit or the transfer of funds.” “From one bank to another,” the then Treasury Secretary, João Nuno Mendes, said at the time. This comes during a period characterized by rising interest rates, increasing housing costs for families, and rising inflation rates.

“This measure has increased the movement of bank customers,” says Natalia Nunes, considering that it has been positive for families. This latest annual monitoring report shows the macroprudential recommendations on new consumer credit issued by the Bank of Portugal. The regulatory body specifies in the document that “there is a strong increase in the volume of credit transfers in 2023,” without providing data on these operations.

For DECO's Financial Protection Bureau Coordinator, this support had a double impact. “We have seen many families making repayments, even if partial, mobilizing their savings to pay the repayments and, as a result, reducing payments. They felt motivated to do so because they would not be penalized by this committee.”

“It also had another positive impact, because it reduced the burden that families had to bear to transfer credit to another bank,” says the head of the Consumer Protection Association, a process that ended up being complicated and expensive. But this only happened “because it started some competition” between financial institutions trying to attract clients from other banks, and bearing the commissions associated with transferring the loan.

This bet is made nAt the same time, there was a decline in new financing for home purchases. New housing loan contracts fell by 47 million euros in February, to 1,137 million euros, according to Bank of Portugal data.

The depreciation commission must end once and for all

In addition to defending that the suspension of the early repayment commission should be a final measure and not a temporary one to promote a greater movement of bank customers, Natalia Nunes says there are still other measures that can be adopted to speed up bank transfers that require new procedures. Creditworthiness assessments of customers, properties and new public bonds.

He added: “Anything to speed up the process, and always preserve the interests of the parties, is positive.” There must be cases where the accreditations are relatively recent and the assessment has been done recently. There may be a period during which this rating remains valid. “This has to be viewed with some consideration and some criteria,” he concludes.

The end of the commission for early repayment of housing loans falls within a set of 45 measures that Deco presented to the parties that he believes should be followed in this legislation. “If we are encouraging consumers to be more interested in saving, we cannot allow them to pay for their ability to achieve these savings,” Paulo Fonseca told JE in March. It also ends up “discouraging consumers when they want to transfer their mortgage loan to another bank that offers better terms and have to pay this commission,” the coordinator of Deco's legal and economic department also pointed out.