Portuguese Banks Offer Mortgage Spreads Below 1% Amidst Market Competition
Portuguese banks have intensified competition in the mortgage sector, with spreads on new home loans now being offered at levels below 1%. This development comes as many households continue to manage high monthly payments on existing variable-rate mortgages, prompting a surge in inquiries about renegotiating loan conditions. The spread, representing the bank's profit margin above the Euribor reference rate, has become the primary focus for borrowers seeking to reduce their financial burden. According to data from consumer defense association Deco, a significant portion of active mortgages in Portugal were contracted with variable rates, which became costly following the European Central Bank's rate hikes. While the Euribor rates themselves have shown signs of stabilization, their impact on loan payments is only adjusted at predetermined intervals of three, six, or twelve months. Renegotiating the spread, however, offers a more direct path to lowering monthly installments. Financial institutions, while aiming to protect their profit margins, are responding to market pressures by presenting more competitive offers. These often come with conditions, such as contracting additional products like insurance or credit cards, which allows the bank to compensate for the reduced spread. A report from the Bank of Portugal noted a 27% increase in new mortgage contracts in the first half of 2025, with mixed-rate loans dominating the market. This indicates a consumer preference for initial periods of payment stability. In this context, banks are using low spreads as a key tool to attract these new clients. For existing borrowers, this competitive landscape creates an opportunity. Experts advise homeowners to actively seek proposals from multiple banks to leverage in negotiations with their current lender. Simulating the long-term financial impact of a lower spread versus the cost of any bundled products is considered an essential step before making a decision. The current trend suggests that spreads will remain competitive as long as the demand for housing credit continues and banks vie for market share. Stay informed on Lisbon property market developments at realestate-lisbon.com.
