Many families, despite the pandemic, turned to banking to be able to buy a house. Even with the pandemic crisis, they showed sufficient confidence in the economy to ask for mortgage loans, taking the amount requested to reach highs of more than a decade. Part of the explanation for this appetite lies in the cost of this financing. These loans have never been cheaper in Portugal.
2020 was a year that was marked by the pandemic crisis that caused some difficulties for several Portuguese. Even so, with the employment protection measures, many maintained financial stability to, among others, buy a house. And they did so using home loans. Proof of this is that it is necessary to go back to 2008 to observe such a high value with regard to the amount made available by banks for this purpose. In 2020, this figure reached 11,389 million euros.
At the end of the year, this reality only became more evident. In the last month of 2020, the amounts granted by banking institutions exceeded 1.2 billion, reaching even 1,203 million euros for loans for the purchase of housing, the highest monthly value since July 2008.
All of this at the same time that the average interest rate applied to new home loan transactions reached the lowest level since the registration. Last December, the cost required from families to subscribe for credits of this nature was fixed at just 0.80%.
For the fifth consecutive month, a new historical minimum was thus established. Compared to the month of November, where the rate was fixed at 0.84%, there was a fall of four basis points. Compared to the same month in 2019, when that rate was 1.1%, we are now facing a 30 basis point drop.
The fact that the interest rate associated with new home loans has reached this historical low of 0.8% is due to these two reasons: the drop in bank spreads but also the 12-month Euribor rate - which is currently on negative ground, at -0.507%. The market rate cancels part of the margin charged to banks, hence the rate of new loans is even lower than that of spreads.
And, it seems, this very low interest to buy a house on credit is expected to remain at historic lows for some time. The European Central Bank (ECB), which has a highly expansionary monetary policy in place, has been giving guarantees that the Euro Zone reference rate will remain at 0%, thus maintaining the pressure on interest rates used as indexes in the anchored in historical minimums.