Public guarantee on housing credit: impact depends on adherence

The public guarantee that will facilitate access to housing credit for young people has already been regulated and is expected to become operational by the end of the year or early 2025. For Vítor Bento, president of the Portuguese Banking Association (APB), the impact of this measure on the market will depend on several variables, namely on the adoption of the public guarantee.

The ordinance that will regulate the public guarantee has already been published in the Official Gazette, and banks are now adhering to the measure and preparing its implementation, which should take until the end of the year. Therefore, only from December or early 2025 will young people up to the age of 35 be able to sign up to the State guarantee, which makes it possible to grant housing credit with 100% financing.

When asked about the impact of the public guarantee on young people's access to housing credit, Vítor Bento believes that the extent of the measure's impact will depend on several variables, namely on uptake, he told Lusa in connection with the conference that this Tuesday (October 15) marks the 40th anniversary of the APB (founded in October 1984).

The president of the APB also said he understands the Government's perspective, which wants to support this segment of the population with the public guarantee on housing credit. But he also understands the position of the Bank of Portugal (BdP) on this measure – which has called for caution – since it wants to ensure the quality of loans and the resilience of banks. In any case, Vítor Bento predicted that these positions will be "reconcilable".

It should be noted that the public guarantee, by allowing 100% bank financing, ends up circumventing the BdP rule that limits housing loans to a maximum of 90% of the lower value between the price of the house and the bank appraisal. As a result, new young buyers end up paying much higher mortgage payments, although they still have to comply with the Portuguese regulator's rules regarding the limits of the effort rate (up to a maximum of 50%) and loan maturities. In any case, the president of the APB believes that the difficulty in accessing housing credit is due to factors external to the banks, such as house prices or income, and not due to bank restrictions. "Access is actually quite easy. The difficulties that people experience are external to the credit conditions; they have no difficulty in accessing credit in terms of what depends on the banks. It is in the banks' interest to grant the largest possible volume of credit, as long as this credit is secure," he stated. In fact, “if it weren’t for bank credit, most families wouldn’t have had access to housing. I estimate that around two-thirds of families in Portugal own housing thanks to bank credit,” Vítor Bento told Lusa, adding that interest rates on this credit in Portugal have been lower than the eurozone average over the last 20 years.

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Source: Idealista