A rise in mortgage moratoriums has caused mortage interest rates to drop.
After the COVID-19 pandemic, interest rates in Potugal on mortgages are following a downward trend, in May reaching the lowest value since at least the beginning of 2009, the date that marks the start of the historical sequence of the National Statistics Institute in Portugal (INE). The reduction last month (a similar trend to that seen in April) is attributed to the mortgage moratorium scheme in the country, which suspends mortgage payments until March 2021, in full or in part. This applies to the monthly instalment of families with housing credit and is a scheme which many thousands of Portuguese have taken advantage of due to the COVID-19 pandemic.
Specifically, the interest rate was set at 0.903% in May, which corresponds to a decrease of 4.4 basis points compared to the previous month (0.947%). Taking into account only the loan contracts for the purchase of houses signed in the last three months, there was also a decrease to historic lows. The rate fell from 0.891% in April to 0.845% in May.
The average value of installments fell to 227 euros in May (a monthly decrease of 10 euros and a year-on-year decrease of 19 euros). Of this amount, 41 euros (18%) corresponded to interest payments and 186 euros (82%) to amortised capital. For contracts signed in the last quarter, the average instalment fell to 258 euros.
"The reductions in rates, as well as in the average monthly instalment, observed in April and May, may be associated with changes resulting from the moratorium scheme", explains INE.
The opposite effect was felt on outstanding capital which, also due to moratoriums, registered a remarkable increase last month. This is because those who request the use of the moratorium are able to reduce costs at this time, but increase payments in the future.
In May, the average outstanding capital for all contracts therefore rose by 124 euros compared with the previous month and by 1,230 euros compared with May 2019, to 54,010 euros, according to INE. In mortgages granted in the last three months, the average amount of capital outstanding was 108,189 euros, 302 euros more than in April.