House payments rise again in May, reaching 300 euros. And the rise in interest rates is far from over… – Executive Summary

Euribor prices have registered an increasing trend, which has caused enormous difficulties for Portuguese households: the increase in monthly installments for banking institutions has been steady in recent months, and in May the news promises to be another problem. In particular, the 12-month Euribor rate, which is currently the most used in Portugal for variable rate housing loans, was set on Wednesday at 3.858%.

According to the Bank of Portugal, the 12-month Euribor already represents 43% of the “stock” of permanent housing loans with a variable rate: therefore, if your contract is revised in May, you can expect another hole in the budget, (a) since the mortgage payment will increase by 300 Approx euros, if you have a 12-month contract, as disclosed to “Executive Digest” by DECO Proteste.

Let’s go to the numbers:

Take, for example, a 30-year loan of €150,000, with a spread of 1% (the bank’s trading margin):

– If the loan is indexed with Euribor for 12 months: the premium you will pay over the next 12 months will increase to 781.12 EUR, in addition to 297.76 EUR (61.6%) in relation to the installment you paid in the last year (483.36 EUR).

– If the indicator is 6 months, get ready to pay 759.23 euros to the bank, an increase of 20.1% (127.07 euros) compared to November 2022, when the installment amounted to 632, 16 euros.

– Finally, if you have a 3-month contract: the average price of Euribor is 3.165% (the average price of Euribor in April), which means an increase in your premium by 10.56%: it rises from 660.66 to 730.46 €, plus 69.8 €.

“The peak will happen in the last quarter of 2023.”

For Nuno Reko, specialist in finance at DECO PROTESTE, the trend of rising interest rates will not be broken in the near future. “There is no change in context, so interest rates will continue to grow until the last quarter of 2023, contrary to what the Governor of the Bank of Portugal, Mario Centeno, said, who predicted a peak this summer,” reports the “Executive Summary.”

“Although the spikes are not dangerous,” the expert explained, stressing that “if there is no change in the context in which we live, after the peak, a significant drop is not expected.” [à semelhança do sucedido em 2008] values, which should then stabilize between 2.5 and 3%.”

Therefore, he noted, urgent action was required by the government. In this regard, we have submitted an open letter to Parliament regarding several measures that we consider necessary. Nuno Rico explained that the measures presented in the Mais Habitação program are very insignificant and do not respond to the difficulties of the Portuguese, and he highlighted that the proposal is to “limit the increase in interest to 3% in relation to the initial contract and to defer the loan capital, which will allow consumers to obtain fixed installments in their permanent housing loans.”

It should be remembered that Euribor has started to rise further since February 4, 2022, after the European Central Bank (ECB) admitted that it may raise key interest rates this year due to rising inflation in the eurozone – a trend that was reinforced with the start of Russia’s invasion of Ukraine on the 24th. February 2022.

Three-, six- and 12-month Euribor rates hit all-time lows, respectively, at -0.605% on December 14, 2021, and -0.554% and -0.518% on December 20, 2021. Among the rates that a group of 57 Eurozone banks want In lending money to each other in the interbank market.

The impact of a higher Euribor will be greater or lesser depending on how much principal is still outstanding. Consumers must use the Home Loan Simulator, provided by Banco de Portugal, to calculate the monthly installment and adjust the household budget.

DECO PROTESTE challenges the government to stop the increase in home loan payments