Novobanco adds “cashback” to government credit measures for youth

The government has adopted a series of measures to help young people when buying their first home, through tax exemptions as well as a general guarantee that covers the “down payment” on a home that is not lent by banks. Support that helps Novobanco take advantage of the housing loan offer for these clients. In addition to strengthening these measures, the bank grants a “bonus” to those who obtain a mixed rate credit to buy a home, returning part of the loan granted.

“To enable you to realize your dream of buying your first home, Novobanco has a loan in mind. Take advantage of the new measures for young people up to 35 years old and the surprise we have for you,” reads the bank’s website led by Mark Burke. Since August 1, young people in this age group who want to buy their first home can obtain an exemption from IMT and stamp duty. This measure comes in addition to the general guarantee (still being regulated) which will allow those who are unable to pay the “down payment” on the home to benefit from this mechanism that can cover up to 15% of the value of the home.

In addition, Novobanko has a promotion that promises to return 2% of the loan value to the current account – the so-called Cashback – If a loan is contracted at a fixed rate for five years, with a global effective annual rate (TAEG) of 4.7%. The offer drops to 1% in the case of financing at a fixed rate for two years and an APR of 4.9%, taking into account optional sales associated in both cases, such as salary domiciliation and the acquisition of multi-risk insurance and life insurance with the insurance of the corporate partner. For example, a loan of 150,000 euros at a fixed rate for five years generates Cashback Three thousand euros in the young man's account.

Although Novobanco refers to a specific audience on its website – “housing loans for young people up to 35 years old” – this “bonus” does not only apply to this age group, but also to customers who have housing loans and a current account at the bank, subject to certain conditions. In the same vein, the financial institution also announces that parents can request a loan to help their children buy a home. “Your parents, or a close relative, can mortgage their home to Novobanco, requesting a Multisolutions loan that can help you make the down payment on your home,” reducing the amount due and, therefore, the installment.

Asked by Jornal Economico whether this could represent an additional risk for customers and the bank, an official source said that Novobanko’s “family offer”, which aims to enable parents or close relatives to mortgage their home to the bank to apply for a multi-solution loan that helps with the down payment on a young person’s home, is specifically aimed at making it easier for young people to get their own home on more favorable terms for customers and with less risk for customers and the bank.

All these solutions are being promoted to speed up the contracting of housing credit after Novobanko recorded a mere 0.1% increase in credit to individuals, to EUR 11.7 billion, in the first half of the year, while housing credit fell by 1.1% in this period compared to the end of last year. This trend is widespread in almost the entire sector, as other banks are also trying to attract more customers by offering promotions.

Santander Portugal has a similar campaign – although it doesn’t mention government measures or a younger audience – giving back 1% of the value of home loans up to €1,000 paid as credit card repayments for purchases in the bank’s store. Other institutions are betting on it. Spread Zero, as with BCP, or bear the fees related to credit transfers, which are Caixa Geral de Depósitos (CGD) or BPI.

The measures are positive, but not sufficient.

This effort is being made in an attempt to counter the decline in demand for loans to buy a house in a scenario where interest rates remain high, although the European Central Bank (ECB) has already started to cut interest rates. The government has decided to go ahead with measures to support young people in buying a house to try to compensate for this scenario. This support is seen as positive by the financial institution led by Mark Burke.

“Novobanco supports legislative measures aimed at responsible access to housing loans for young people, both in terms of tax exemptions and in terms of state guarantees for financing up to 100% of the transaction value. These measures should encourage increased dynamics and growth in housing credit among young people,” says an official source to JE.

Other banks, while positive, have expressed some doubts about the effectiveness of this support. “It is another measure that can enable young people to buy their first home,” said João Pedro Oliveira e Costa, CEO of BPI, stressing that “the problem is the lack of homes.” Miguel Maia, CEO of the Portuguese Central Bank, said that the diploma “will not solve the problem of housing credit,” a position shared by Santander Portugal. Paulo Macedo, CEO of CGD, stressed that despite the tax advantages it has, it will only cover a certain segment of people.

The sector stressed that it is still necessary to understand how this measure will be integrated with the Bank of Portugal’s rules. “We will only have a final opinion when we understand how 100% financing plays out when we can only provide 90%,” said the CEO of the State Bank. “It is not the banks that do not want to lend 100%. It is a supervisory measure,” and this needs to be clarified between the supervisor and the state. “It is a matter of rules, not a lack of will,” he said.