Lisbon Mortgage Relief: Payments Drop by up to €124 in August, But Experts Warn Investors to Prepare for a Shift

Lisbon's Rising Mortgage Rates: A Guide for Foreign Investors

Foreign investors and homeowners in Lisbon with variable-rate mortgages are seeing immediate benefits as rates continue to fall, with monthly payments for some dropping by as much as €124 in August. However, financial experts are sounding an alarm, advising that this period of relief is a temporary window that should be used to prepare for a market shift expected in late 2025.

The current downturn provides a strategic opportunity to reduce principal debt or build a financial cushion before interest rates begin to climb again.

According to Nuno Rico, a specialist at DECO-PROteste, the trend of falling rates is stabilizing, and a reversal is on the horizon. 'From the last quarter of 2025... those with shorter contract maturities – namely 3-month Euribor – may see minimal decreases or possibly small increases,' he warns. This is critical for investors, as Portuguese household debt is at its highest since 2011, with new buyers taking on significantly larger loans. The average new mortgage now stands at €157,000, meaning even a small rate hike could translate into a €150-€200 increase in monthly payments, straining budgets.

• Capitalize on Savings: Use the current monthly savings from lower payments to make extra principal payments on your mortgage, reducing your overall debt burden before rates rise.
• Build a Buffer Fund: Set aside the extra cash into a dedicated savings account. This fund can be used to offset higher payments in the future without impacting your lifestyle.
• Review Your Mortgage Terms: If you have a mortgage renewing soon, analyze the terms carefully. Consider if locking in a fixed rate, even if slightly higher now, might offer better long-term security against volatility.
• Stress-Test Your Finances: Calculate how a potential 1-2% interest rate increase would impact your monthly payments and overall budget. Ensure you have a plan to manage this potential increase.

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