The Bank of Portugal (BoP) announced on Monday that it has issued new macro-prudential recommendations on housing loans, which are expected to come into force from April 1 this year. This time, Mário Centeno’s team clarified that the new loans for the purchase of a home will have a maximum term of 40 years for bank customers aged 30 or less, while contracts with customers between 30 and 35 years old will have a maximum term of 37 years. . For borrowers over 35, the maximum maturity of bank financing is increased to 35 years.
“In light of the convergence of the average maturity of new mortgage loan contracts at 30 years towards the end of 2022, Banco de Portugal, in its capacity as macroprudential authority and by deliberation of the Council of January 25, 2022, recommends new maximum limits. To be provisioned for new housing loan transactions according to the age of the borrowers”, It reads in a statement from the banking regulator.
These are recommendations that must be respected, since banks that do not respect the established limits will have to explain themselves to the BDB, according to the same press release. For families looking for a mortgage to buy a home, the age of the oldest member of the family will be calculated.
The decision now comes because the BDP recognizes that “the average maturity of new mortgages has not converged, linearly and gradually, around 30 years”.
At the end of 2021, the average maturity length was 32.5 years. Now banks will have to look to reduce it to 30 years by the end of 2022.
“The Banco de Portugal, as a macroprudential body, will continue to monitor compliance with the recommendation and may adopt additional measures it deems appropriate to achieve the objective of convergence of the average maturity of new mortgage loan contracts at 30 years by the end of 2022”, BdP pushes.
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