Provision of housing loans falls to lowest … – Reuters

                 

                         
                     

                 

 
                         

The Portuguese families with loans, reviewing in October, will benefit from a further decline in the benefits payable in the coming months as a result of the fall in Euribor rates, which are at the lowest levels ever.

                     

                         The recent measures announced by the European Central Bank (ECB), among which was cutting the policy rate to 0.05%, minimum historical, are the source of new fall in Euribor rates, which are associated with almost all of the loans in Portugal.

In addition to the reduction of the benefit, which is more expressive in loans linked to Euribor six months, the best news for families with loans stems from the expectation of maintaining interest rates at historically low levels in the coming months.

The stabilization reflect this, the futures contract three months, due in December, negotiating this Tuesday to 0.08%, ie, investors are admitting that this will be the fee at the end of year.

From the beginning of the year, the Euribor three and six months, the most used terms in Portugal, have fallen to a third of the value.

The Euribor three months, which are associated to the latest housing loans and loans to companies, was 0.292% in January. In September, this rate stood 0.097%.

The average Euribor six months, rounded to the nearest thousandth, as required by the rules set by the Bank of Portugal, fell in September to 0.2%, below the 0.396% January. Also the recoil of the 12-month Euribor is significant since the beginning of the year, from 0.562% to 0.362%.

The reflection of the recent fall in Euribor rates, which are fixed in money market rates through the that an extended set is available for banks to lend money to each other, is more expressive in loans arising from the period of six months.

A simulation done by PUBLIC for a loan of 150 000 euros for a period of 30 years, with a spread 0.7%, and based on the Euribor six months, corresponding to a monthly allowance of 475,60 euros. Given the last review, six months ago, the provision falls 14.28 euros.

In contracts associated with three-month Euribor, which implies revisions rate every three months, the reduction will be less. With the new rate, the provision corresponds to 468 euros, less 6.8 euros compared to the last review.

The decline in performance is more significant in the older loans, which are associated, at least in large Most, spreads (commercial bank margin) lower. The most recent contracts have spreads higher, which attenuate the decrease of provision.

The maintenance of interest rates in the older loans has yet another advantage, to increase the component capital repayment, which will mitigate the impact of future increases in Euribor.
scenario significant increase in interest rates money market looks away in 2015 and 2016, and some analysts even admit a scenario of low rates interest in the euro zone, not necessarily at current levels until the end of 2017.

This prospect of low interest stems from weak growth forecasts for the coming years. The latest indicators – declining trust, falling inflation, rising unemployment in Germany – reinforces this pessimistic

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