The Portuguese government has introduced measures to mitigate the impact of increasing borrowing costs on households, following the European Central Bank’s (ECB) decision to raise its deposit rate. The majority of Portuguese loans, approximately 90%, are subject to fluctuating interest rates, which have experienced a significant surge recently.
Last week, the ECB increased its deposit rate for the tenth consecutive time, bringing it up to 4%. Although bank officials suggest this could be the peak level, they anticipate that borrowing costs will remain at this rate for a prolonged period.
In response to these developments, Finance Minister Fernando Medina announced on Thursday that homeowners can request their banks to reduce the six-month Euribor rate, a benchmark used to set their mortgages, by up to 30% over two years. This initiative is expected to benefit between 900,000 and 1 million families.
Once the two-year period of reduced mortgages concludes, lenders will be able to start recouping unpaid interest after four years. Furthermore, the government has approved a pause on fees imposed by banks for early mortgage repayments.
This move by the Portuguese government comes as an effort to alleviate the pressure on households grappling with rising mortgage bills due to increased borrowing costs.
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