Negative Euribor in Portugal: what will change with the new law?

The new legislation for Portuguese banks will work in favour of clients wanting mortgages / Creative commons

28 May 2018, 14:02

The law on negative Euribor (lei da Euribor negativa) was approved in the Portuguese Parliament and will bring about new changes. The measure is intended to oblige banks to apply Euribor in full to mortgages on real estate. This means that bank clients with housing loans are entitled to an interest credit as long as the Euribor is negative. In the end, though, what’s really going to change?

An interest credit may be created

The law allows banks to create an interest credit in the customers’ favour, to deduct the corresponding part and collect when interest rates return to positive values. The idea is to speed up the operationalisation of the measure and to avoid banks now having to repay a small part of the loans.

The measure is valid for all contracts

The new rules will be valid for new and existing contracts, but will not have retroactive effect.

Banks have ten days to review the indexer

As soon as the law is enacted, banks will have to review the value of the indexer to see if the final overall interest rate assumes negative values.

All advertising is obliged to transmit this information

All mortgage communications and advertising campaigns should be clear about the new measure. Reference must be made to the possibility that the interest rate applied may assume negative values depending on the evolution of the corresponding index.

The law, now approved, will be passed to the President of the Portuguese Republic, who will decide on its enactment. The law will enter into force the day after its publication in the Diário da República, the Portuguese State Gazette.

From the original Portuguese article: O que vai mudar nos créditos com a Euribor negativa? (Jornal de negócios)