1. To whom do these rules apply?
The recommendation is directed at credit institutions and financial companies authorized to grant credit in Portugal.

In practice, it establishes the rules that banks must follow when analyzing a financing request, both for mortgage loans and other types of credit.

2. What are the main changes?
The Bank of Portugal has introduced four main changes:

the maximum recommended debt-to-income ratio is lowered from 50% to 45%;
there are now only two tiers for the maximum loan term;
the exception that allowed financing up to 100% of properties belonging to the bank itself is eliminated;
real estate leasing is no longer covered by this recommendation.

3. Why did the Bank of Portugal change the rules?
According to the supervisor, the objective remains to prevent over-indebtedness of families and to preserve the stability of the financial system.

The decision comes in a context where mortgage lending has once again grown significantly, accompanied by rising house prices and increased demand from young buyers.

At the same time, after the cycle of rising interest rates that began in 2022, the market entered a more dynamic phase, which led the Bank of Portugal to reinforce prudential criteria to avoid future risks.

4. What is the debt-to-income ratio and what changes?

The debt-to-income ratio corresponds to the percentage of monthly income allocated to loan payments.

With the new rules, the recommendation is that this value should not exceed 45% of net income.

This calculation includes all credit components of the household, not just the mortgage.

In addition, banks are still required to simulate a scenario of rising interest rates to verify whether the client would be able to continue paying the loan.

5. Are there exceptions to the 45% limit?

Yes.

The Bank of Portugal continues to allow some flexibility. Up to 10% of new contracts can exceed this limit, provided the bank considers there are factors that reduce the risk of the operation.

This means that a debt-to-income ratio exceeding 45% does not automatically prevent loan approval.

6. What is the maximum loan term now?

Now there are only two tiers:

up to 35 years of age, the maximum recommended term is 40 years;

for clients over 35 years of age, the limit is 35 years.

Previously there were three age brackets.

7. Does the bank still finance only 90% of the house?
As a general rule, yes.

The Bank of Portugal maintains the recommendation that banks finance:
up to 90% of the lower value between the purchase price and the appraisal, when it is a primary and permanent residence;
up to 80% in other situations.

However, the exception that allowed financing of up to 100% when the property belonged to the bank itself disappears.

It is important to remember that this recommendation coexists with specific regimes, such as the public guarantee intended for young people up to 35 years old, which may allow financing corresponding to the total value of the acquisition, provided that the respective legal requirements are met.

8. Do these rules apply only to mortgage loans?

No.

The recommendation also covers other types of credit granted to individuals, including personal loans and car loans.

9. Are there limits on consumer credit terms?

Yes.

The recommendation stipulates that:
personal loans should, as a rule, have a maximum term of seven years;
loans intended for education, health or energy transition may have a term of up to ten years;

the same ten-year limit applies to car loans.

Do these rules oblige banks to approve or reject a loan?
No.

Banco do Brasil's guidelines are macroprudential recommendations directed at financial institutions.

Each bank continues to individually analyze the client's financial situation, and may consider other relevant elements in the risk assessment.

In practice, these rules seek to ensure more prudent credit granting, simultaneously protecting families and the stability of the financial system.
Real Estate News, Notícias Informativas