State Guarantee Now Supports 1 in 4 New Mortgages in Portugal

A quarter of every new euro borrowed for buying a home in Portugal already carries a public seal of approval. That figure alone hints at how swiftly the State-backed guarantee, introduced only last year, has reshaped the mortgage market, particularly for younger households. The latest Banco de Portugal update shows that the programme now underwrites 25.9 % of all lending for main residences, with October marking yet another monthly record.

Snapshot of a policy that is moving the dial

In less than twelve months the State guarantee has grown from a niche tool into a mainstream financing shortcut. Contracts totalling €4 B were signed up to October, spread across 20.4 thousand loans. Nearly one in two mortgage contracts taken out by people under 35 now relies on this public backing, a proportion that climbed to 50 % of loan volumes in October. At the same time, 46.5 % of the €1.2 B budget envelope set aside for the scheme has already been tapped, underlining both its popularity and the pace at which public exposure is mounting.

How the guarantee works and who can apply

The mechanism, created by Decreto-Lei 44/2024 and fleshed out in Portaria 236-A/2024, allows the Portuguese State to step in as a partial fiador, covering up to 15 % of the purchase price when a bank grants a mortgage that can reach 100 % financing. Eligibility is limited to buyers aged between 18 and 35, purchasing their first permanent home priced below €450 000. Borrowers must also keep annual taxable income beneath the eighth IRS bracket, roughly €83 700 in 2025. The guarantee remains in place for a maximum of ten years, after which the loan continues without it.

Demand surge among younger borrowers

Momentum is most visible in the under-35 cohort, where the guarantee now underpins 41.4 % of contracts signed since January and 43.6 % of loan amounts. October alone produced 2.6 thousand new loans worth €538 M, both numbers setting fresh highs. Rising interest rates have not dented demand; instead, the programme appears to offset higher financing costs by lowering the loan-to-value hurdle that had kept many renters on the sidelines. Housing advocates welcome the easier access but warn that the scheme mainly benefits higher-income young professionals, leaving lower-wage earners struggling with the same affordability gap.

A country of contrasts: regional uptake

Take-up is not uniform. In Alentejo, Beira Baixa, Lezíria do Tejo, Terras de Trás-os-Montes and Beiras e Serra da Estrela, more than half of mortgages signed by young adults come with the guarantee, suggesting it is acting as a critical lever in lower-density areas. By contrast, Greater Lisbon and the Madeira archipelago show uptake closer to a third, a sign that steep prices in those markets often exceed the €450 000 ceiling or that buyers prefer other financing routes. Policymakers are watching these regional patterns to assess whether the guarantee is easing geographical imbalances or simply mirroring existing disparities.

Banks, balance sheets and the public purse

For lenders, guaranteed loans are attractive because the State absorbs part of the credit-risk cushion. The exposure currently stands at €551 M, the sum the Treasury would need to honour if every guaranteed borrower defaulted today. While that is far from a budgetary crisis, the Bank of Portugal’s governor Mário Centeno has urged prudence, noting that rapid growth in any credit segment can mask latent vulnerabilities. The central bank also highlights that borrowers using the guarantee display a higher average debt-service-to-income ratio, adding a layer of monitoring pressure on supervision teams.

What economists are debating

Supporters argue the guarantee is a fast, targeted fix for a generation squeezed by record housing prices and volatile Euribor rates. Critics counter that injecting extra purchasing power into a supply-constrained market risks pushing square-metre prices even higher. They point to preliminary signs of upward drift in new-build quotations during 2025. Others question whether public funds should prioritise buyers at all, proposing instead a greater focus on affordable rental stock. Still, few dispute that the measure has become, for many young Portuguese, the only feasible path out of the rental trap.

Looking ahead: key dates and unknowns

The next official data drop is scheduled for 5 January 2026. By then, analysts expect the €1.2 B guarantee pool to be at least two-thirds committed. Government officials have not ruled out topping up the fund, but any extension will have to compete with broader fiscal goals in a year already forecast to test budgetary headroom. For would-be homeowners, the message is clear: the window runs until 31 December 2026, yet the fund could exhaust sooner if current trends persist. Whether the scheme ultimately tempers Portugal’s housing crisis or merely changes who can bid higher remains the unanswered question hovering over every new mortgage dossier.