Young families struggle to pay off loans

THE NUMBER of families in Portugal who are in debt has increased according to a financial stability report produced for the Bank of Portugal.

The statistics collected from various private and public banks show that more and more families cannot keep up the repayments of loans and are extending the time limit to pay them off.

Only the current low interest rates provided by most banks are preventing many borrowers from going under accumulated loans for houses, furniture, cars and holidays.

The Bank of Portugal has identified certain “vulnerable groups” that would be disastrously affected if interest rates were to rise. These include young people, particularly families, with low educational background and low salaries.

The average salary in Portugal presently stands at just under 1,000 euros a month, with the better paid including those working in the financial sectors (average salary 2,000 euros) and highly qualified workers in the IT fields (average salary 3,000 euros+). In the last decade, property prices have shot up by around 40 per cent, which roughly corresponds to the rate of inflation for the same period.

The bank carried out an evaluation on what would happen if interest rates climbed by five per cent: it would increase their culminated debt from around 70 per cent at present to 90 per cent.

Last year, the average family had borrowed 118 per cent of their monthly salary.