State guarantee on housing credit for young people must be regulated by September

The members of the Government responsible for finance, housing and youth must approve by September the necessary regulations so that the State can provide a guarantee to banks for housing credit to young people up to 35 years old.

According to the decree-law that establishes the conditions under which the State may provide a personal guarantee to credit institutions with a view to enabling the granting of credit for home ownership and permanent access to young people up to the age of 35, published today in Diário da República and which comes into force on Thursday, “is the responsibility of the members of the Government responsible for the areas of finance, housing and youth to approve, within a maximum period of 60 days from the entry into force of this decree-law, the regulations necessary for the provisions of this diploma”.

The document establishes as conditions for the scope of the measure that “the borrower(s) of the contract are between 18 and 35 years of age and have a tax domicile in Portugal” and “income that does not exceed the 8th bracket of personal income tax”, i.e. 81,199 euros of annual taxable income, as announced by the Government.

Additionally, the borrowers of the contract cannot be owners of an urban building or autonomous fraction of an urban housing building, nor can they have already taken advantage of the State’s personal guarantee under the this decree-law.

The transaction value cannot exceed 450,000 euros and the State guarantee cannot exceed 15% of the value, intended to enable the credit institution to finance the entire of the property price.

At the end of May, the Council of Ministers approved several measures within the scope of the new housing strategy approved by the Government at the beginning of that month.

Banco de Portugal urges caution in new legislation

Asked about the extent of this guarantee and what happens in case of non-compliance, the Minister of the Presidency, António Leitão Amaro, began by explaining that “the guarantee exists until the young person pays the first 15% [do empréstimo] to the bank”, specifying that when this 15% is paid “the State leaves the equation”.

Therefore, he said, the State will only be called upon to pay some amount if there is a default in paying the loan, highlighting, however, that this amount will have to be paid to the State — in the same way as the default with the bank does not exempt the customer from responsibilities.

“The State is only called in if the young person fails to comply and [nesse caso] the State acts in the role of guarantor, creating an obligation between the parties”, he said.

Leitão Amaro highlighted, however, that the levels of default on housing credit are low.

The Bank of Portugal (BdP) warned that caution and balance are needed in the public guarantee for housing credit for young people and said it would work with the Government in regulating the measure, with the aim to find solutions to guarantee the balance of the measure.

The housing credit rules currently in force determine that the loan cannot exceed 90% of the value of the house (being, for this purpose, considered the lowest value between the acquisition value and appraisal value) of own and permanent housing.

The Government said it wanted to have the measure in force on August 1st.


Francesco Giganti

Journalist, social media, blogger and pop culture obsessive in newshubpro

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