Around 70.000 families could have an effort rate above 70% by end of 2023, BdP said

The universe corresponds to 5% of active mortgage contracts.
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With mortgage instalments on the rise, Bank of Portugal (BdP) governor Mário Centeno estimates that by the end of the year “around 70,000 families could have permanent mortgage servicing costs exceeding 505 of their net income”.

According to the idealista portal, which quotes Centeno’s statements, more and more families, due to the rise in Euribor rates, are struggling with effort rates of more than 50 per cent . The BdP data released this Monday indicates that, in December 2021, 35,600 home loan contracts had an effort rate of more than 50 per cent and less than 100 per cent. At the end of last year, the number of contracts in this situation was close to 46 thousand.

The forecasts for 2023 are therefore not very encouraging: “The crossroads brings greater financial tightening for families and companies as a result of the monetary policy cycle,” says Centeno, adding that, at the end of December, “around 70,000 families may have expenses with the permanent housing loan service of more than 50 per cent of their net income. This corresponds to 5% of families with mortgage loans , out of a total of 1.5 million active contracts, at risk of having to spend more than half their monthly budget to pay their mortgage instalments by the end of the year.

For the governor, “strengthening savings and reducing indebtedness, as well as public support and the role of the banking sector in preventing default can mitigate these risks”.

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