Euribor Rates for 6 and 12-Month Terms Increase, Affecting Mortgage Costs
An announcement of price changes in the interbank lending market indicates that the Euribor rates, which are the primary benchmark for calculating mortgage payments in Portugal, have risen for the six-month and 12-month maturities. The three-month rate held steady. This development directly impacts the cost of variable-rate home loans for thousands of households and property investors across the country. The increase reflects a shift in expectations for future interest rate policy from the European Central Bank (ECB).
A detailed breakdown of the rate movements shows that while the three-month Euribor remained unchanged from the previous day, the six-month and 12-month rates ticked upward. This divergence suggests that while short-term borrowing costs are stable, the market is pricing in a higher cost of money over the medium to long term. In July, the monthly averages for Euribor had already reversed a months-long downward trend, with the six-month rate showing the most significant increase, a clear signal of changing market dynamics.
Several factors are contributing to these rate changes. The primary influence is the recent stance of the ECB, which opted to maintain its key policy rates at its last meeting on July 24. This decision followed a cycle of eight consecutive rate cuts that began in June 2024. While some market analysts predict the ECB will hold rates steady for the remainder of the year, others are forecasting an additional 25-basis-point cut at the next meeting on September 10-11 in Frankfurt. This uncertainty is contributing to volatility in the Euribor rates.
Real estate agency reports and market observations show that buyer and seller behavior is sensitive to these financing costs. An increase in mortgage rates can temper demand for housing, as it directly affects affordability. A mortgage specialist at a major Portuguese bank noted, 'We are advising clients to carefully simulate their mortgage payments under different rate scenarios. The era of predictable rate cuts is over, and borrowers need to be prepared for potential increases in their monthly obligations.'
The mortgage market response and lending conditions are adapting to this new reality. Banks may become more cautious in their lending criteria if they anticipate further rate volatility. This could impact the availability of credit for some buyers. The behavior of buyers and sellers will be closely watched; rising rates could lead some potential buyers to delay their purchase, while sellers might have to adjust their price expectations to meet the market.
A comparison with neighboring regions shows this is a Eurozone-wide phenomenon, as Euribor is a benchmark for the entire currency bloc. However, the impact can be more pronounced in countries like Portugal where variable-rate mortgages are highly prevalent. Property developer reactions to these trends will also be critical. Higher financing costs can impact the feasibility of new construction projects, potentially affecting the supply of new homes in the medium term.
The expected rate trajectory based on current indicators is one of continued uncertainty, with a slight upward bias for the six and 12-month terms until the ECB provides clearer forward guidance. The market is now in a holding pattern, awaiting the central bank's next move. The outcome of the September meeting will be a crucial indicator for the direction of mortgage costs for the remainder of 2025. Stay informed on Lisbon property market developments at realestate-lisbon.com.
