Exceptional and Temporary Support Measure - Temporary Fixation of Installments

Decree-Law no. 91/2023, of 11 October, creates a measure to temporarily fix installments in order to provide greater predictability and mitigate the effects of the increase in the indexing of credit contracts for the purchase or construction of permanent own housing or for carrying out works on permanent own housing, guaranteed by a mortgage covered by Decree-Law no. 74-A/2017, of 23 June.

In accordance with the provisions of Article 16 of the aforementioned legal decree, this measure to fix installments takes effect on November 2, 2023.

Institutions cannot charge fees or costs for implementing the installment-fixing measure, nor can they make its application contingent on borrowers contracting other products or services.

The installment-fixing measure applies to the above-mentioned credit contracts which, on the date of the request submitted by the borrowers, meet all of the following requirements:

• Have been signed by March 15, 2023, or by March 31, 2024, in cases where they have been entered into as part of a credit transfer operation to a different lender, as stipulated in Article 24 of Decree-Law No. 74-A/2017, of June 23, in its current wording;
• Have been entered into with a variable interest rate or, having been entered into with a mixed interest rate, are currently in a period where the variable interest rate applies;
• Have a remaining term of more than five years;
• Are not in arrears or default on financial installments;
• The borrowers are not in a situation of insolvency;
• They are not covered by a default risk action plan or out-of-court procedure for the regularization of default situations, under Decree-Law no. 227/2012, of 25 October.

• The temporary fixation of installments arises from the review of the credit contract's installment by the institutions, fixing its value at the result of applying the benchmark corresponding to 70% of the simple arithmetic average of the daily six-month Euribor quotations from the month prior to the borrowers' request (the "measure's benchmark"), plus the spread contractually agreed upon. The other conditions of the credit contract, including the term and the interest rate review frequency agreed upon in the contract, remain unchanged.
• During the period in which the installment is fixed, its value is not subject to revision as a result of the variation in the six-month Euribor mentioned above.
• Fixation of the installment does not affect the application of:
  • The temporary suspension of the early repayment fee in article 7 of Decree-Law no. 80-A/2022, of 25 November;
  • The measures provided for in Decree-Law no. 80-A/2022, of 25 November, in its current wording, and does not count towards the calculation of the borrower's effort rate provided for therein;
  • The temporary interest rate reduction measure provided for in Decree-Law No. 20-B/2023, of March 22, which is determined based on the benchmark and the installment calculated according to the contractually established terms.

• The installment-fixing measure applies to installments that fall due within the 24 months following the date of acceptance by the borrowers (the "measure's effective period"), where the first installment that reflects the application of this measure is the one that begins after acceptance thereof.
• The application of the installment-fixing measure is immediately suspended when the benchmark of the credit contract is lower than the result obtained by applying the benchmark of the measure. The application of the installment-fixing measure, which is suspended for this reason, is automatically resumed whenever the benchmark value of the credit contract exceeds the result obtained from applying the measure, for the remaining period of the measure's effective period.
• The installment-fixing measure ceases immediately if the installments are not met.
• The borrower may request, at any time, that fixation of the installment be terminated.
• The expiration or suspension of the installment-fixing measure, as stipulated in the preceding clauses, leads to the reinstatement of the conditions outlined in the credit contract.

• The amount representing the difference between the installment due as contractually established and the value of the installment set as described above is deferred (the "deferred amount") and is amortized as follows:
  • In the last two years of the credit contract, when the remaining term of the contract, at the end of the installment fixing, is less than six years;
  • From the fourth year after the end of the installment fixing period, when the remaining term of the credit contract, at the end of the installment fixing, is equal to or greater than six years.
• The deferred amount is added to the loan amount, considering the interest rate of the credit contract applicable at the time when it would have been due if the borrower had not opted for this program.
• The deferred amount can be repaid in advance, without any commission or charge to the borrower.
• The amount of capital outstanding on the date the installment-fixing measure ceases may not exceed the amount of capital outstanding on the date the installment-fixing measure begins. For these purposes, the installment to be paid by the borrower is the amount obtained by applying the interest rate from the credit contract to the loan amount, as calculated above in relation to the capitalization of the deferred amount, whenever this amount is higher than the value of the fixed installment.
  
  Partial repayment of the credit is allocated, first and foremost, to the amortization of the deferred amount, resulting in a corresponding reduction in the installment amount fixed in accordance with the provisions in this chapter.

• In the event of early repayment for the purpose of credit transfer, as provided for in Article 24 of Decree-Law No. 74-A/2017, of June 23, in its current wording, during the installment-fixing period, the borrower is entitled to the new lender maintaining the installment value set under the terms applicable to the previous credit contract, for the remaining term established in Article 7, Paragraph 1.

Upon receipt of the request, BBVA presents the following to Customers within 15 days:

• An estimate of the deferred amount, based on the duration of the measure, which is 24 months;
• The repayment plan indicative of the deferred amount and the respective evolution of the outstanding capital;
• The comparison between the installments in accordance with the contractually established terms and the installment values that would be fixed under this decree-law;
• The comparison between the loan repayment plan without the application of the installment-fixing measure and the one resulting from its application, including the total amount allocated to the borrowers for each of these scenarios;
• This information will be sent by BBVA in a durable format through the same channel it was received (in response to the received email, or, if the access application was received at one of our branches, BBVA will send information to the Customer at the certified email address on file with this institution or by regular mail).

Within 30 days of receiving the information outlined in the previous point, borrowers must notify BBVA whether they accept the application of the installment-fixing measure to their credit contract. If they do not respond within that period, it is considered that they do not wish to avail themselves of the measure.

Adherence to the measure depends on the acceptance of all parties involved (borrowers and providers of personal and real guarantees).

• In the first 24 months after signing up, the installment will decrease.
• However, after that 24-month period, the installment will be higher than it would have been if you had not signed up for the measure.
• From the moment you sign up for this measure, the total amount of interest payable will always be higher.

(Credit institutions are legally obliged to regularly assess the financial capacity of customers, in order to prevent default).

• If you choose to sign up for the installment plan, BBVA will assess your financial situation. In cases where there is not enough current information available, we may request the necessary information for this purpose and to meet other legal requirements.
• Access to the measure is not conditional on an assessment of your financial situation. However, depending on the conclusions of this assessment, BBVA may present you with more appropriate alternative solutions.
• If you do not provide additional information, you will continue to have access to the measure. However, as a precaution and in the absence of other relevant information about your financial situation, BBVA will classify you, for the purposes of its internal records, as having difficulty meeting your financial obligations. 
• Since this measure involves renegotiating the credit agreement, which is not in arrears or default, opting for the regime will result in an automatic entry in the Credit Responsibilities Central (CRC) as a "regular renegotiation."