Portugal's Housing Loan Interest Rate Drops to 3.307% in August
The average interest rate for new housing loans in Portugal decreased to 3.307% in August, according to official data released by the National Statistics Institute (INE). This figure represents a 7.8 basis point reduction from the rate observed in July, continuing a consistent downward trajectory seen for most of the year. The data provides a clear indicator of improving financing conditions within the Portuguese real estate market.
This latest monthly decrease is part of a more significant trend of rate relief in 2025. The August rate marks a cumulative reduction of 135.0 basis points from the recent market peak of 4.657%, which was registered in January 2024. This sustained decline signals a normalization of credit markets following the period of rapid rate hikes initiated by the European Central Bank to combat inflation.
The INE's report details that the average loan principal for new contracts in August was €145,250, a slight increase from the previous month, suggesting sustained confidence in property valuations. The total volume of new lending also remained robust, consistent with figures from the second quarter of the year. The data reflects the entire portfolio of new housing credit agreements across all lending institutions in the country.
Breaking down the numbers, the decline was observed in both fixed-rate and variable-rate mortgage products, although the most significant movement was tied to the cooling of Euribor rates, which underpin the majority of variable-rate loans in Portugal. The 12-month Euribor, a key benchmark, has shown a steady decline from its highs in late 2023, directly translating into lower monthly payments for new and existing borrowers whose contracts are being repriced.
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Economists from leading Portuguese banks have reacted positively to the news. A research note from Banco BPI stated, “The continued fall in mortgage rates is a crucial support for housing demand. It enhances affordability and should contribute to a stable and healthy level of transactions for the remainder of the year.” The bank's analysts project that the average rate could approach the 3% mark by early 2026 if current macroeconomic trends persist.
The Ministry of Finance has not issued a direct comment on the figures but has previously stated that the stabilization of interest rates is a positive development for the government's broader economic objectives, including its new housing strategy. The lower cost of borrowing is expected to complement public initiatives aimed at increasing the housing supply by making private property acquisition more accessible to the general population.
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