Struggling, cash-strapped Portuguese and foreign residents will benefit from a reduction in Euribor indexed mortgage interest rates by 2.5% compared with last year.
According to future contracts negotiated on three and six month Euribor rates, analysts can work out that interbank interest rates are likely to fall over 2012.
International Monetary Fund president and economist Filipe Garcia was reported by the business daily Económico as stating that Portuguese families with mortgages will have “good news this year”.
“There is a relationship historically between the Refi rate (the European Central Bank’s current and historic interest rate) and the Euribor rate (the European interbank offered rate), and what we have seen in recent months is that the Refi rate has fallen quicker than the Euribor rate,” he said.
“Therefore everything seems to point to interbank lending rates falling in 2012 since the European Central Bank seems to be prepared to provide liquidity to the banks. That means there aren’t many reasons for Euribor rates to rise,” he added.
The expert said that he believed that the interbank market would stabilise over 2012 and that the ECB would probably make a fresh cut to the Refi in January.
It means that for 90% of families and individuals with mortgages in Portugal tied to the six-month Euribor index, monthly repayments will fall for the first time since May 2010.
The same thing is already true for mortgages tied to the three month Euribor index which have already begun to feel a relaxation in pressure on monthly mortgage repayment rates.
In Portugal, 51% of variable mortgages are tied to the six month Euribor index and 42% are tied to the three month rate.
Analysts say that based on future projections for 2012, it is possible to calculate that a family or individual with a €150,000 euro mortgage paid over 30 years with a spread of 1.5% will pay a total amount of €7,218 in 2012, representing savings of €184 on the sums paid in 2011 – in other words a reduction in mortgage interest repayments of 2.5%.