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A set of measures is in place until 31 December 2023 to mitigate the effects of the rise in interest rates on variable rate loans for the purchase or construction of permanent residential property with an outstanding value of €300,000 or less.
Such measures require credit institutions to:
Measures to facilitate the early repayment of credit agreements will also be in place until 31 December 2023, including:
Institutions are required to assess the impact of the interest rate rise on customers’ DSTI of within 45 days after the entry into force of these measures and thereafter at least 60 days before each date the contractual interest rate is scheduled to be set.
The DSTI is the proportion of the customers’ income earmarked to pay all their financial commitments, such as home loans or consumer credit.
Monitoring developments in the DSTI should enable institutions to identify customers whose DSTI has risen to 50% (‘significant DSTI’) and also customers who have a ‘significant worsening of the DSTI’, i.e. situations where customers’ debt service-to-income ratio:
The institution may ask the customer for information and documents to assess their creditworthiness, such as proof of income. The customer must provide the requested data within ten days.
The institution is required to implement the procedures set out in the Pre-Arrears Action Plan (PRAP) if:
When applying the PRAP, the institution must monitor the customer’s creditworthiness to assess whether there is an actual risk of arrears on the credit agreement.
If the risk of arrears is confirmed, and where institutions conclude that the bank customer is creditworthy, institutions should make proposals to renegotiate the loan. Such proposals must be submitted no later than 15 days after the customer provided the information and documents requested by the institution.
The proposals made by institutions may include one or more of the following changes to the terms and conditions of the loan agreement:
Institutions may not make the renegotiation of home loan and mortgage credit agreements conditional on the purchase of other financial products or services, even on an optional basis.
Where the repayment period of the credit agreement is extended, bank customers are entitled to resume the previously agreed period. To this end, they must contact the institutions while the extension of the repayment period is in force.
After being contacted by the customer, institutions must (i) present a proposal for an adjusted repayment schedule illustrating the financial impact of that resumption, and (ii) inform bank customers about the procedures to be followed to exercise that right. After receiving this information, customers have ten days to exercise their right to resume the previously agreed repayment period. Institutions must do so within ten days of receiving the customer’s request.
Institutions are required to inform customers once a year, for five years following the decision to extend the loan repayment period, of their right to resume the original repayment period, more specifically, in a bank statement, conforming to the good practices promoted by the Portuguese Banking Association (Associação Portuguesa de Bancos – APB).
Credit institutions may not charge fees nor raise the loan interest rate as a result of renegotiating the terms of the loan agreement. Customers are also exempt from payments to registry offices and notaries, particularly in relation to property registration.
Institutions may also propose the consolidation of several credit agreements or entering into a new credit agreement to refinance the debt of the existing credit agreement.
Customers are not obliged to accept the proposals made by institutions.
Up to 31 December 2023, customers with loans for the purchase of permanent residence may benefit from extraordinary support in the form of interest relief.
To access this extraordinary support, customers must comply with a set of requirements and request the respective institution for access to that relief.
The temporary interest relief scheme applies to credit agreements for the purchase, refurbishing or construction of permanent residence which:
Temporary interest relief applies where the index of the credit agreement is 3% or more.
The relief based on the difference between the value of the index contractually fixed and:
Where the borrower’s debt-to-income ratio is significant, the relief is always calculated on the basis of the 3% threshold.
To access this extraordinary support, customers must comply with the following requirements:
If the credit agreement for house purchase has more than one borrower, the eligibility requirements must be fulfilled by all borrowers.
The relief shall consist of:
The relief will have the maximum annual value per credit agreement of 1.5 times the Social Support Index, i.e. €720,64.
The amount equivalent to the tax deduction resulting from the payment of interest shall be deducted from the support granted under this scheme with reference to the last available tax period.
The first payment of the relief includes the amount for the preceding months, starting from the month in 2023 in which the eligibility requirements are met.
Customers who meet the access requirements may submit an application to their institution for access to relief, providing the following information:
The institution may request any information or documents deemed necessary and appropriate to verify the borrower’s debt-to-income ratio. They can also consult the most up-to-date information available at the Central Credit Register. Customers must provide the information and documents requested by the institution within ten days.
The institution must inform the customer, within ten working days of receiving the complete application, whether they comply with the requirements for access to the relief. The relief must be applied starting from the instalment immediately following that communication.
Institutions may not charge fees or other charges to process the relief and must inform customers every month by durable medium, namely by means of a statement, of the amount of relief granted.
From 26 November 2022 until 31 December 2023, customers are exempt from paying a partial or full early repayment fee on variable rate loans for the purchase or construction of permanent residential property, regardless of the amount outstanding.
If borrowers wish to repay only part of the debt (partial early repayment), they should do so on the date that coincides with the payment of the instalment and give the credit institutions at least seven working days’ notice that they will make such a repayment.
Customers may also repay the outstanding amount of the loan in full at any time (full early repayment). In that case, they must give at least ten working days’ notice to the credit institution. If customers choose to exercise this right, institutions must issue a statement for mortgage extinction free of charge within 14 business days of the date of termination of the agreement.
Since no fees are charged, no taxes on such fees apply.
Until 31 December 2023, customers may redeem their retirement, education and retirement/education savings plans early, without penalty, up to the monthly limit of the social support index value.
For 2023, the value of the Social Support Index is set at €480.43. Such a redemption may take place without the need to comply with a lock-in period of at least five years, provided that it covers amounts subscribed until 30 September 2022.
Penalty-free partial or total redemption of the savings plans is also possible, without the need to comply with a lock-in period of at least five years and without value limits, in the following situations:
Customers requesting early redemption up to the monthly amount of the Social Support Index may also request to repay instalments of credit agreements secured by mortgages on their own permanent residence, to pay credit instalments for the construction or improvement of own and permanent residence and to deliver to housing cooperatives in permanent owner-occupied housing solutions, insofar as they are exceptional cumulative application schemes.
Customers may also redeem their savings plans early without a penalty, for the early repayment of credit agreements for own and permanent residence, up to an annual limit of 12 times the social support index.
This exceptional regime does not preclude redemption of the total or partial value of the savings plans under situations already laid down by law.
Decree-Law No 80-A/2022 (in Portuguese only)
Law No 19/2022 (in Portuguese only)
Law No 24-D/2022 (in Portuguese only)
Decree-Law No 20-B/2023 (in Portuguese only)
Law No 24/2023 (in Portuguese only)
Home loans – How to enter into
Home loans – Interest rates
Home loans – How to repay and transfer
Managing debts – Arrears prevention
Frequently asked questions > Loans