Mortgage Rates Outlook 2025-2026

Mortgage Rates Outlook 2025-2026

Mortgage rates in Portugal are influenced by Euribor and ECB policies. Forecasts suggest a gradual decline through 2025-2026

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Following the European Central Bank's (ECB) efforts to combat inflation, interest rates saw a sharp rise across the Eurozone. However, with inflation cooling, the ECB began cautiously cutting rates in early 2025. This shift is gradually filtering through to Portuguese mortgage rates, offering potential relief to borrowers.

Q: What are the recent trends and current mortgage rates in Portugal (mid-2025)?

A: As of early to mid-2025, Portuguese mortgage rates have dipped below the 2023-2024 peaks. Variable rates, tied to Euribor, are decreasing as Euribor forecasts soften. Santander's March 2025 analysis showed an average mortgage rate around 3.22% in January 2025, trending downwards.

  • Variable Rates: Linked to 3, 6, or 12-month Euribor. With Euribor expected around 2.3-2.5% by end-2025, payments should decrease. Current offers might be Euribor + 0.7% to +1.5%.
  • Fixed Rates: Offer stability but are typically higher initially. For 10-30 years, rates might be 3.5% to 4.5%+, depending on LTV and borrower profile. Shorter fixed terms (2-5 years) may be lower.
  • Mixed Rates: Initial fixed period (e.g., 2-10 years) then variable. Offers initial certainty, potential later benefits.

Rates for non-residents can differ; banks tailor offers.

Q: What are the mortgage rate forecasts for 2025-2026?

A: Financial institutions predict a continued, gradual decline through 2025-2026, driven by ECB rate cuts and stabilising inflation.

  • End of 2025: 3-month and 12-month Euribor projected between 2.30% and 2.50%. Average variable rates likely 3.0% - 3.5%.
  • Throughout 2026: Further slight easing. Santander projects 3-month Euribor at 1.39%-1.66%, and 6/12-month Euribor at 1.90%-2.14% in early 2026. Variable rates could fall below 3%.

Forecasts are subject to economic changes, inflation, ECB policy, and geopolitical factors.

Q: Should I choose a fixed or variable rate in 2025?

A: This is a key decision.

  • Variable Rate:
    • Pros: Benefits from falling rates, potentially lower initial payments.
    • Cons: Payments can rise if rates unexpectedly increase, less budget certainty.
    • Best for: Those comfortable with fluctuations, believe rates will fall significantly, or plan early repayment.
  • Fixed Rate:
    • Pros: Payment certainty, protection against rate hikes.
    • Cons: Higher initial rate, may not benefit from falling rates, often higher early repayment penalties.
    • Best for: Those prioritising budget stability, borrowing near affordability limits, or believe rates might not fall much or could rise later.
  • Mixed Rate: A compromise, offering short-to-medium-term certainty. Attractive if you expect rates to fall after the fixed period.

With falling rates expected, variable or mixed rates seem appealing. However, fixed-rate security remains strong for risk-averse buyers.

Q: What advice is there for buyers in 2025-2026?

A:

  1. Get Pre-Approved: Understand your borrowing capacity early.
  2. Shop Around: Compare rates and conditions from banks like Santander, Millennium BCP, CGD, BPI, Novo Banco.
  3. Consider a Mortgage Broker: Specialists, especially for expats, can navigate the system and secure better terms. Berkshire Hathaway HomeServices Portugal Property can connect you with trusted brokers.
  4. Factor in All Costs: Include bank fees, valuation, insurance, IMT, and Stamp Duty.
  5. Understand LTV Ratios: Non-residents often get 60-70% LTV, residents up to 80-90%.
  6. Impact of Policy Changes: The end of Golden Visa for real estate and NHR tax regime (with grandfathering) doesn’t directly impact mortgage availability but influences overall financial planning.
  7. Review Forecasts, Plan Conservatively: Base affordability on current or slightly higher rates.

Conclusion

The Portuguese mortgage landscape in 2025-2026 is cautiously optimistic, with rates expected to decline. Choosing the right mortgage requires careful consideration of risk, finances, and long-term plans. Are you ready to navigate the market and secure your Portuguese property? Staying informed and seeking expert advice is key.

For more information, contact us at info@portugalproperty.com

Published in: Business / Portugal Property