This measure, now being formally communicated to the national financial system, is intended to address the effects of public guarantees assisting young individuals in purchasing their first home.
By adjusting the debt-to-income ratio, the supervisor aims to mitigate default risk and prevent structural over-indebtedness among families in a real estate market under considerable pressure.
This reduction in the debt-to-income ratio will, however, not be the only change to the current macroprudential model.
The institution led by Álvaro Santos Pereira is also considering a downward revision of the exceptions currently permitted in commercial banking portfolios.
Currently, regulations allow up to 10% of each bank’s new loan volume, per semester, to reach a more aggressive debt-to-income ratio of up to 60%, while still safeguarding an additional 5% margin to exceed the general limits.
These tolerance thresholds are expected to undergo significant cuts, with the exact values still under technical analysis by the regulator.
The strong dynamism of youth credit under state guarantees is the main driver of these regulatory changes, accounting for almost a third of the total value of new housing loans in the country at the start of the year.
This accelerated growth has led to a general increase in the average repayment periods of bank portfolios, generating remarks and warnings from the Governor of the Bank of Portugal.
Given this reality, the supervisor is also considering a change to the recommendations regarding the maximum maturity of contracts, which currently set limits of 40 years for young people up to 30 years old, 37 years for those between 30 and 35 years old, and a ceiling of 35 years for those who exceed that age.