“Prudence needed” regarding mortgage payments
Portugal’s prime minister António Costa has said today that the impact of rising interest rates on home loans is being monitored by the government and should be faced without drama.
He called “for prudence in the actions of the European Central Bank (ECB)”.
António Costa was speaking to reporters at the end of a conference on digital skills at ISCTE in Lisbon after being asked about government measures to help families with mortgages in a situation of high interest rates.
The questions follow rising criticism over the level of help to families currently being offered by the government.
Television commentator and State advisor Luís Marques Mendes said in his weekly Sunday night slot that “it is good for the government to start thinking of a new support programme for the beginning of next year”. The current raft of measures “is necessary, but is not sufficient”, he told anchor Clara de Sousa.
Said Mr Costa this morning: “We have been monitoring very closely with the Bank of Portugal and the Portuguese Association of Banks the evolution of credit, and the 2023 budget has a specific measure that allows an increase in liquidity for families who have housing credits in assets, as these families can apply for a reduction of one bracket in withholding tax”.
According to the PM, on the part of banks, there has also been a clear willingness to negotiate with customers – find “the best ways to accommodate the impact of rising interest rates”.
He referred to the pandemic, when there was tension around this same issue. The problem “was overcome” through negotiation, he said.
“We will approve a law that favours this negotiation and eliminates the costs associated with this negotiation. So, I think we should face the situation we are going through without drama”.
According to Costa, the policy of “normalisation” of rates by the ECB will point to long-term stabilisation of reference rates at around 2%.
“It is not desirable for the interest rate to rise so much (to 3%)”, he said. “The ECB should be quite prudent in raising interest rates to control inflation.
“We understand that this inflation results less from a large money supply in circulation (and a large inflow in people’s incomes) and more from an imported and well-known cause which is Russia’s war against Ukraine – a war which has aggravated the rupture in supply chains and introduced the added fact of an energy crisis”.
In other words, for António Costa, “raising interest rates is not the way to fight inflation”.
“The ECB should be prudent in exercising the mechanism to increase interest rates, but there must be awareness that variable rates are on a rising trend. I am convinced that between the Bank of Portugal, the Portuguese Banking Association and the mechanisms available to the government, it will be possible to prevent this evolution of interest rates from having dramatic consequences,” he affirmed, pointing out that families, with variable interest rates, in the short term, “will pay more for their credit”.
“We have to maintain this evolution without a situation of social crisis, of loss of housing, because the right to housing is a fundamental right of families and that it is necessary to ensure and protect”, he concluded.