Parliament edges closer to making banks apply negative mortgage rates

By TPN/Lusa, in News · 11-05-2018 14:56:00 · 0 Comments
Parliament edges closer to making banks apply negative mortgage rates

The budget committee of Portugal's parliament has approved legislation tabled by the Left Bloc that would oblige banks to reflect negative Euribor rates in the interest payments made by mortgage customers - paving the way for the possibility of borrowers benefiting from negative rates.

The bill was put forward after discussion with the governing Socialist Party, and was backed by members of all parties present, so it is likely to pass in plenary session of parliament.

The Socialist Party announced on 22 March that it had reached an agreement with the Left Bloc to ensure that bank customers could benefit from interest rate credit relative to the whole period in which Euribor - the interbank lending rate to which mortgage rates in Portugal are linked - might be negative.

If the legislation is approved by parliament, when interest rates are negative, an interest credit is formed for the bank customer that goes to reduce their payments when rates rise and become positive.

In this way, banks would not have to pay clients. However, they must record the difference in their mortgage accounts.

Portugal's banks have publicly expressed their opposition to the change. Nuno Amado, the president of the largest non-state bank, BCP, this week said that the measure could have negative effects that have not been taken into account, for example by putting Portugal's banks at a disadvantage relative to their European counterparts.

The vice-governor of the Bank of Portugal, Elisa Ferreira - herself a former minister in a Socialist government - last month expressed concern at the prospect of negative mortgage rates, describing the issue as a “particularly complex” one whose impact it was difficult to foresee. The country would be, she stressed, "sailing in uncharted waters".


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