The growing consumer confidence, spurred on by the economic recovery, are supporting the increasing demand for credit cards by the Portuguese, who rely more and more on their cards to purchase items for which they might not necessarily have the money.

According to new data published by the Bank of Portugal, the amount of Portuguese seeking for credit from banks has also risen considerably, with the number of people who secured loans to buy cars going up in 2018, by 120,000.

In terms of credit cards, the increase of those in debt climbed by 43,000 with 2.29 million people currently using them to make purchases.

This is now the highest number of people in debt with their credit card companies since records were first taken by the Bank of Portugal in March 2009.

The amount of debt outstanding has also climbed strongly, and now sits at €3.25 billion, another new record.

The amount owed to financial institutions for vehicle credit has ballooned to a record high, and has reached €6.1 billion euros this year. Overall, 840,000 people are in debt with banks having secured credit to purchase a car.

The Bank of Portugal has warned of a steep increase in consumer credit, explaining that this is being driven by a reduction in the unemployment rate, and an increase in wages, though interest rates on these types of credits remain high. The banking regulator however pointed to increased competition among financial institutions having resulted in them easing on the spreads levied on top of existing interest rates.

This follows after the general approval of loans in Portugal reached a 15-year high in 2018. Figures indicate that a credit of € 4.66 billion was issued, for an average of €12 million a day.

Despite concerns over the ballooning debt among consumers, the number of people unable to meet their monthly repayments actually dropped in 2018 to their lowest in almost a decade.

Nonetheless, 137,000 people are unable to pay the minimum monthly value demanded from their credit card companies, while 61,000 people have defaulted on their car repayments.

In terms of mortgages, the number of home owners who are unable to meet their repayments has fallen to below 100,000 for the first time since 2009. But despite calls on banks to employ stricter rules in issuing mortgages, Portuguese were handed close to €10 billion to purchase real estate last year, which is up almost 20% on 2017.

Original Story: The Portugal News | Brendan de Beer
Photo: FreeImages.com/ Lotus Head
Edition:Prime Yield