Portugal Mortgage Payments Dip in August—What Expats Should Do Now

Buying or already paying off a home in Portugal could feel a little lighter on the wallet this month, but don’t grab the celebration corks just yet. August’s mortgage statements bring noticeable relief for most borrowers as Euribor-linked loans are re-priced lower, trimming triple-digit euros off typical instalments. Yet analysts warn that the downward cycle is losing steam, and what looks like a breather today could be the calm before a new rate plateau—or even an uptick—next year.

Cheaper August repayments: real numbers

A borrower with a €150k loan, 30-year term and a 1 % spread tied to the 12-month Euribor will see the monthly instalment drop to roughly €638, versus €762 paid a year ago. That is a saving of €124 every month, or close to €1,500 over the next 12 months if rates held steady. The repricing reflects July’s average Euribor reading of 2.079 %, far below the heights touched in late 2023. For newcomers running the numbers, this is the cheapest point to finance a Portuguese residence since the early stages of the post-pandemic rate surge.

Cooling trend: Euribor finds its floor

The tailwind is weakening. In the final days of July the 12-month benchmark barely nudged, and on 5 August it even ticked up to 2.129 %. Shorter maturities have already reversed course: the 3-month Euribor now sits near 1.986 % and the 6-month gauge at 2.055 %, both slightly higher than in June. Under the hood, traders are pricing in a pause by the European Central Bank after eight consecutive cuts since mid-2024. The next ECB gathering, scheduled for 10-11 September in Frankfurt, will be pivotal in showing whether the easing cycle really has run its course.

Forecasts to 2026: divergent paths ahead

Market forwards hint at a floor around 2 % through year-end, followed by a gentle climb kicking off in spring 2026. Some desks, such as Banco Carregosa, assume the Euribor will hover 20-30 basis points above the ECB’s deposit rate, implying values of roughly 2.0-2.2 % well into next year. Others, including the Spanish Painel Funcas, project a slightly rosier scenario in which the 12-month gauge stays near 1.9 % until late 2026. For borrowers, these discrepancies mean only one certainty: volatility is not over, and budgeting should leave room for higher coupons beyond next summer.

Tactics for borrowers: making the most of the window

Because the law waives the early-repayment fee on variable-rate mortgages until 31 December 2025, residents may trim principal now at zero cost. Another defensive move is switching to a mixed-rate contract, currently the dominant choice for new loans since late 2023. Banks are still keen to win clients by shaving spreads, especially for borrowers bringing in salary deposits. Anyone locked into a revision indexed to the 6-month Euribor—used in roughly 38 % of outstanding contracts—should ask the lender to simulate a move to the cheaper 12-month option before signing.

Government relief and housing programmes

Lisbon’s toolbox in 2025 mixes tax breaks and state guarantees. First-time buyers under 35 pay no IMT or stamp duty on homes up to €324,058, with partial relief extended to properties up to €648,022. The high-profile Garantia Pública lets young purchasers finance up to 100 % of the price on dwellings below €450k, the state acting as guarantor for 15 % of the loan. Beyond youth-focused aid, the executive has kept alive a temporary interest-subsidy mechanism for vulnerable families and is ramping up supply through the Programa 1.º Direito and the broader Construir Portugal strategy, aiming to add 59k units between public, private and cooperative stock.

Anatomy of the Portuguese mortgage market

Variable rates still dominate. According to the Banco de Portugal, 6-month Euribor contracts cover 37.74 % of outstanding housing credit; 12-month links account for 32.28 %, and 3-month deals 25.28 %. The remainder sits in fixed or mixed arrangements that have gained traction as rate shocks multiplied in recent years. Average pricing on new mortgages and renegotiations slipped to 2.91 % in June, the lowest since October 2022, helping to rekindle demand after a sluggish 2024.

Dates that matter on your calendar

Keep an eye on 11 September for the ECB verdict, 31 December 2025 for the end of the fee-free early-repayment window, and the first quarter of 2026 when many forecasters pencil in the next potential rate upswing. Until then, the combination of lower instalments and policy incentives offers a fleeting but valuable chance for residents—and would-be arrivals—to reinforce their personal balance sheets while Portugal’s property market remains hot.