Want to apply for a home loan? Banks will limit the maximum amount they are allowed to lend to 30%

Público revealed on Monday that higher Euribor rates will limit the maximum amount banks are allowed to lend, and the reduction could reach around 30% as early as next month. Reducing indebtedness will also particularly affect individuals with low income or low savings who, in view of the applicable rules, are required to guarantee at least 10% of the property’s holding value, in addition to the expenses inherent in the operation.

The duration of the contracts, set according to the ages of individuals at the time of applying for credit, is another factor that makes accessing new loans difficult. According to Eupago’s simulation, a 30-year-old married couple with a net monthly income of 1,800 euros, without grandchildren or other loans, last January could receive a loan of 226,000 euros, payable in 37 years. But higher interest rates (2%) means, in September, that the same couple will be able to finance themselves only with 163.5 thousand euros – 28% less. If the Euribor increase reaches 2.5%, a value that can be reached in the next month, the amount drops to 154.2 thousand euros.

the reasons? First, the higher Euribor rates, associated with most new home loans in Portugal, as well as restrictions that the Bank of Portugal has imposed since 2018 (when Euribor rates were negative), to reduce the risk of excessive home debt. Banco de Portugal should not change the formula for the DSTI account with an increase of 3% but says it is monitoring the situation. “As a macroprudential body, it monitors macroeconomic and financial developments and will continue to monitor compliance with the recommendation, as well as promote changes in it, with the aim of always enhancing its effectiveness,” the regulator told the daily.