March 30, 2023

deco. Increased rates are setting off alarms…and banks that aren’t particularly sensitive

Deco – Portuguese Association for the Protection of Consumers – has received hundreds of contacts from families asking for clarification on the increase in mortgage payments in view of the interest rate hike by the European Central Bank (ECB). To I, Natália Nunes, coordinator of the Financial Protection Bureau (GPF), admits that from September onwards “families really started to feel this impact” because they had credit indicators at Euribor for three and six months. “Then they saw the revision of the installment value and saw the increase in the amounts that have to be paid each month to the bank.”

But he acknowledges that the headaches started about a year ago, when the Christine Lagarde-led entity signaled that a rise in Euribor rates was coming, but that it would be gradual. “Being gradual would eventually allow families themselves to prepare for these increases, but the truth is they weren’t gradual, they were galloping.”

A situation that, according to the person in charge, affects those with relatively low incomes or those with very high effort rates. And if there are cases of families facing increases of 10 or 30 euros, h I knows that there are also those who are faced with increases of 400 euros. The screenplay is credited to Natália Nunes. “For example, a 100% increase in the mortgage loan for high incomes ends up not making much of a difference, while for a low income family it does, mainly because families suffer from housing loan mortgage increases, but also with inflation ».

The people who are most affected by these “galloping” increases of “100, 200, 300 or 400 euros” are those who have the most funds in debt or who still have a long time to complete the loan. And even more punishing is the value of the properties purchased, which are higher due to the prices applied in recent years.

the banking sector limits solutions

Despite the fact that new mortgage renegotiation rules came into effect in November and allow, for example, families to reduce their mortgage payments to an amount compatible with their income, the financial system has been insensitive and has made it difficult credit renegotiation. “What we have seen is that there continues to be some resistance and some barriers on the part of the banks in terms of renegotiating and restructuring credit. We have seen families who are still in a normal situation, that is, they can still pay the installments, but with a lot of trouble contacting the bank and it, many times, saying that they do not meet the conditions to carry out the same restructuring, often without it explains why he didn’t meet the conditions,” emphasizes Natália Nunes.

A situation that leads the person in charge to give a red card to the industry, as one of the measures that Deco has defended, since the legislation was introduced, is that the banking institution was enshrined in the obligation to inform the consumer about the reason. that the renegotiation request would have been rejected. “This is not in the legislation. Credit institutions just tell people they don’t qualify, but don’t point out arguments. Of course, looking at the loan statements, we can draw some conclusions: we see that there are loans that are very long, that expire in 75 years, loans that were concluded very recently, for example, less than a year ago. These may be some aspects that will lead to, for example, some banks saying that they don’t meet the requirements,” he tells them I.

On the other hand, Natália Nunes reveals that she sees some banks only renegotiating grace periods, i.e. one year. “Keeping the Euribor rate high is turning out to be a postponement of the situation,” he says.

However, Banco de Portugal has already ensured that contracts renegotiated under the new Default Risk Action Plan (PARI) regime “do not have a specific marking in Credit Responsibilities Central that allows banks to identify them”, i.e. it will not end up on the regulator’s blacklist. Natália Nunes also says that, beyond this situation, the banks cannot change the terms of the contract, stating that “there can be no charge of any value for the negotiation, nor any commission. This is clearly provided for in the legislation.”

However, it draws attention to the fact that there are two classifications in the Credit Responsibility Center: renegotiation in case of default and normal renegotiation. “Families who are going to renegotiate their credit and are not in bankruptcy will be shown with the information to settle. But I believe that Banco de Portugal will be careful to comply with the current legislation.”

Scenario lived in the distant troika

The coordinator of the Financial Protection Bureau believes that the times experienced during the Troika period, when banks were left with thousands of homes for non-payment, fattening their portfolio of bad debts, will not happen again, mainly because she recognizes that times are different now . “Right now, we have legislation in place since 2012 that obliges banks to regularly monitor compliance and proper execution of contracts. We also have the Bank of Portugal itself careful in the way credit was granted,” adding that, “unlike what happened between 2008 and 2012, when we had high unemployment rates, at the moment, the rates are relatively low, which means families continue to have an income.”

Natália Nunes also guarantees that this situation of non-compliance is avoided at all costs, both by the banks and by the families, although she admits that “the big problem is that the incomes are insufficient for the expenses of the families, but with all the U bank is also ready to be able to respond and avoid reaching the levels of defaults that occurred then.” And he adds: “We see families who, as soon as they have the perception that they will have difficulties, contact the banks. On the other hand, it is essential that banks, i.e. those on the front line to respond to consumers, have the necessary skills to advise and inform”.

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