More Time to Pay the Piper: Portugal Extends Debt Moratorium

The deadline for public moratoriums on debt repayment was on the last day of September — but private moratoriums are still an option.

The Portuguese government has extended public moratoriums on debt for both individual households and companies until Sept. 30, 2021, which is a six-month extension from the previous end date.

This decision comes amidst a series of discussions among political leaders regarding the condition of economic recovery in the country, and the very real concern that many households and businesses would not be able to restart mortgage and other debt payments by March of next year.

Individual homeowners can request a suspension of payments on their home mortgage as well as on any loan used  to finance education or professional training. To be eligible, the household must prove that they have experienced a loss of at least 20% of their earnings as a direct result of the pandemic. In addition, they must not owe more than 5000 euros to Finanças or Segurança Social.

An entity such as a company, private charity institution, and non-profit association can also qualify for a moratorium. They need a proof of address in Portugal, or to verify that they have economic activity in the country. 

The moratorium continues to include the suspension of both capital and interest payments, as well as service and commission charges, for home mortgages as well as for companies from sectors that have been listed by the state as having been the most economically impacted by the pandemic. This list includes hospitals, gyms, hospitality, transportation and schools, among many others.

Companies in sectors not included in the list will have to restart paying the interest on their loans on April 1, 2021, but will continue to be exempt from making capital payments until Sept 30th.

It is important to note that moratorium holders have some space, however limited, to maneuver when it comes to changing certain terms of debt repayment under the program. For example, those who want to keep the capital amount of their debt unchanged can request to make monthly interest payments, so that that amount is not attributed to their capital total. It’s also possible to cancel the moratorium and restart payments before the scheduled end date, by notifying the bank 30 days in advance.  

While the deadline to apply for public moratoriums was Sept. 30, 2020, the possibility of applying for a private moratorium continues to be available. According to Banco de Portugal, these moratoriums fall outside their jurisdiction and have to be negotiated directly with your bank.

However, the Associação Portuguesa de Bancos (APB) has created a protocol for the development of private moratoriums based on European Banking Authority guidelines. While the APB makes it clear that each institution determines the specific terms of their moratoriums, their initiative aims to provide terms that are equivalent to those offered by the public moratorium created by the government. Moreover, private moratoriums allow far more flexibility as far as qualifying terms, as opposed to the public one, which had stricter conditions. Public moratoriums only cover two types of credits: mortgages for primary residences — meaning mortgages for holiday or investment properties were not eligible — and personal loans for education or professional training. Private moratoriums can apply to a greater range of consumer loans, including car loans, credit card debt, and personal loans.

Atlas reached out to private banks about the workings of moratoriums in their institutions. Millennium says its customers are largely seeking out moratoriums for home mortgages, and while the bank declined to divulge what percentage of requests were approved, they reported in their 2020 first-semester report that they approved 120,000 moratoriums. 

We asked Millennium whether interest rates will be raised when payments begin, and they explained they would not, as Portuguese legislation doesn’t permit it. 

Neither BPI nor Novo Banco replied to our requests for comment in time for publication.

Illustration by Bogdan Kamuta
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