Negative Euribor Law in Portugal
The Negative Euribor Law was announced by the President of the Portuguese Republic and finally entered into force in July 2018. This measure is intended to oblige banks to apply Euribor in full to mortgages on real estate. So, clients with housing loans are entitled to credit interest as long as the Euribor is negative, to be deducted when interest rates return to positive values.
According to the Consumer Protection Association (DECO) "it took two years to correct this situation of injustice and breach of contract by the banks." Up to now, credit institutions were establishing a limit for interest rates, considering that the applicable interest rate could never be less than zero, but the contracts didn’t complement this information. If an agreement is reached at a variable rate it is assumed that both parties understand the variations in benefits, but since the end of 2015 (when Euribor started to show negative rates) banks have been experiencing an irregular situation.
Legally, a credit institution is expected to receive, at least, as much as it loaned - mentioned the Bank of Portugal in April 2016. However, this principle of implementing zero rates was not considered in the contracts signed, so DECO presented this solution of credit interest to Parliament: "there is no maximum limit on the Euribor rate, so it doesn’t make sense to apply a minimum interest limit either."
If you have a variable rate housing loan, check if you can benefit from this new law through the loan rate renewal conditions regularly sent by the bank. You only have to "compare the average (negative) Euribor with the spread" 1. If the sum of the Euribor average with the spread results in a negative amount, you will be entitled to the credit interest.
Since July, housing loan contracts are required to reflect the negative values of the Euribor. This was a great DECO achievement for consumers. The new rules will be valid for new and existing contracts, but will not have retroactive effect.
1 mentioned DECO.