The housing market is in the pipeline and BOP is worried about the pace of lending. The institution has issued a warning to banks to prevent them from being exposed to a future crisis.
The real estate market is in the red. And the facilities in granting credit for the home purchase as well. Banco de Portugal (BdP) is concerned about the pace of lending and has already warned banks to avoid exposing them to a future crisis. The institution asks for greater care to the bank, admitting the possibility of adopting measures that hinder access to housing loans.
"Price developments in the real estate market may pose risks to financial stability as they lead to the relaxation of the criteria for granting housing loans in a context of high household indebtedness," said the BOP in the Financial Stability Report released in the meantime.
The supervisor wants to prevent banks from facing a new bad credit scenario in the future. According to the Bop, "there is a significant percentage of households with very high indebtedness relative to their income", which will put them in a "particularly difficult situation if there is any income cut or swear".
"It is important to ensure that the current dynamics of housing and economic credit, in particular the real estate market, do not, on the one hand, reduce the still high private indebtedness ratio and, on the other hand, do not promote the accumulation of excessive risk in the banks' balance sheet and the excessive allocation of resources of the economy in the real estate sector, "says the regulator.
BdP proposes to adopt restrictive measures
The concern of the Bop is very evident in the statement accompanying the Financial Stability Report, where the supervisor states that "it is essential that financial institutions continue to properly and prospectively assess borrowers' creditworthiness while avoiding excessive risk taking in new credit flows, particularly in mortgage loans. "
The entity led by Carlos Costa goes further and admits even being "considering taking measures to strengthen the assessment by credit institutions of the creditworthiness of private borrowers." The measures were not disclosed, but the supervisor could ask the banks for a higher effort rate and more collateral, taking into account future interest rate hikes.
The report also reveals that, in the first quarter, new housing loans increased by around 40% year-on-year and the percentage of home-financed loans increased to 45% compared with a minimum of 20 % in 2013 (65% in 2009). In September, of the total of 115,106 million euros that the banks had granted to individuals, about 81% (93,568 million euros) were for housing.
News: Idealista