Household Vulnerabilities, Financial Stability, and the Role of Policies in Portugal

July 11, 2023

Preview Citation

Format: Chicago

Laura Valderrama. Household Vulnerabilities, Financial Stability, and the Role of Policies in Portugal, (USA: International Monetary Fund, 2023) accessed November 21, 2024

Summary

Since the pandemic, developments in the real estate market in Portugal suggest that housing vulnerabilities have increased. Rising living costs and interest rates are stretching household finances which could cause an increase in defaults or force households to cut back on consumption. Simulation results suggest that, under adverse conditions, almost half of all households could be financially stretched with a disproportionate effect on lower income households. In addition, one third of consumers may need to adjust spending although the estimated reduction in aggregate consumption is limited. The impact on the banking system is manageable but a sharp house price correction could have a material impact on capital buffers. Policy support aimed at tacking the cost of living crisis could help mitigate some of these risks.

Subject: Cost of living, Financial institutions, Housing prices, Income, International organization, Loans, Monetary policy, Mortgages, National accounts, Prices

Keywords: Aggregate Consumption, Cost of living, Europe, Financial Stability, Fiscal Support, House price correction, Household vulnerability, Housing Affordability, Housing Prices, Housing vulnerability, Income, Loans, Mortgage Market, Mortgages, Simulation result, Stress Testing, Vulnerability indicator

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Selected Issues Paper No. 2023/046
Stock No:

SIPEA2023046
ISBN:

9798400248016
ISSN:

2958-7875

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