Few personal loans are taken out at the same time as home loans, which could mean that the personal loan is used as a down payment on a home loan. The Bank of Portugal, as revealed by the Follow-up Report on the Macroprudential Recommendation on new credit, published this Friday, March 31, has been “supervising the possibility that contracting personal credit is used as a way to circumvent the limits on the LTV ratio (loan to value)”, that is, the relationship between the amount lent by the bank and the value of the property.
The Bank of Portugal says that if this situation occurs, it will be “of reduced materiality”, even knowing that it will be around 1% of the total amount in 2022.
According to the Bank of Portugal, “in 2022, several institutions were asked to provide information on the controls implemented or to be implemented, in order to prevent the occurrence of this type of situation” and, according to the responses obtained, “the control It is done through: indication in the internal regulations; monitoring of the granting of personal loans close to the date of contracting the mortgage loan and compilation of information on the origin of the social capital”.
After checking the cases, the supervisor guarantees that “new measures were taken to correct the situation”.
The Bank of Portugal evaluated six months of personal and housing loans when they were contracted simultaneously. But it is not seen by the supervisor as a problem in the sector.
No down payment”? No problem. How banks circumvent borrowing limits when buying a home
This is a way for customers to circumvent the limits imposed on the entrance of the house. In the Bank of Portugal’s macroprudential recommendation, the amount that can be lent is limited to 90% depending on the value of the house. That is, you can only request up to 90% of the value of the house.
The Bank of Portugal periodically evaluates the application of the recommendation, having concluded that, in 2022, “almost all new home loan operations registered a ratio loan to value (LTV) less than or equal to 90%. The average LTV ratio of new credit operations for own and permanent housing, as defined in the Recommendation, decreased 3 percentage points compared to the third quarter of 2018 and two percentage points compared to 2021, standing at 75% in 2022 ″.
According to data from the Bank of Portugal, in 2022, 54% of new mortgage loans had an LTV ratio of less than or equal to 80%. With respect to stock of housing loans, as of December 2022, around 93% have an LTV ratio equal to or less than 80%.
in update
Source: Observadora
