1. Introduction
The Portuguese real estate market has undergone significant transformations in recent years, with a direct impact on housing credit. In 2024, factors such as the Euribor rate, inflation, and the policies of the European Central Bank (ECB) have influenced the financing conditions for those who want to buy a house in Portugal. The question that many ask themselves is: what are the current trends in the home loan market and how do they affect buyers and sellers? In this article, we will explore the major changes and what to expect in the near future.
2. Overview of the Mortgage Loan Market in Portugal (2024)
The year 2024 brought a more volatile environment for mortgage loans in Portugal, following the significant impacts of high inflation and the ECB's monetary tightening policies. The widespread rise in interest rates during the end of 2023 put pressure on household budgets and created a challenging scenario for those who already had loans or wished to purchase a new home.
However, the market has shown signs of stabilization, with a slight decrease in interest rates on new home loan operations. According to the latest data from the Bank of Portugal, the average interest rate on new contracts fell to 3.7% in July 2024. This drop reflects a trend of greater contracting of loans at mixed rates, which have proven to be attractive in the face of future uncertainties.
3. Evolution of Interest Rates in 2024
One of the biggest concerns for homebuyers in 2024 is the level of interest rates. After a period of continuous increases in 2023, which pushed rates to the highest levels since the 2008 financial crisis, the market has begun to adjust. The average rate of new credit operations changed from 3.75% in June to 3.70% in July 2024.
This decrease is attributed to two main reasons:
- More affordable mixed rates: The campaigns promoted by banks in Portugal, offering mixed rates with more favorable conditions in the first years of the contract, have attracted many new buyers.
- Reduction of Euribor rates: In 2024, Euribor rates for all maturities have fallen, which directly impacts the decrease in installments for those who opt for variable rate credit.
4. The Relevance of Euribor in Housing Credit
Euribor is one of the main indices used to determine the interest rates on home loans in Portugal. The Euribor rate, set by the ECB, has been one of the main contributors to instalment increases over the past two years. However, in 2024, Euribor began to decline gradually, reflecting an easing of inflationary pressures in the euro area.
Currently, more than 20% of new loans for the purchase of permanent housing in Portugal are indexed to Euribor. The impact of this rate on the monthly installment varies depending on the type of loan chosen, but generally, those who opt for a variable rate will experience greater fluctuations over time.
5. Fixed, Variable and Mixed Rates: Which One to Choose?
When taking out a home loan, one of the biggest decisions involves choosing between a fixed, variable, or mixed rate. Each of these options has its advantages and disadvantages, depending on the economic conditions and the buyer's goals.
- Fixed Rate: Guarantees a fixed installment for the entire period of the contract. Ideal for those who want predictability and financial security, especially in times of economic uncertainty.
- Variable Rate: It depends on the fluctuations of the Euribor, offering lower installments when rates are falling, but can increase significantly in periods of rise.
- Mixed Fee: A combination of the previous two, where the client pays a fixed fee for an initial (usually lower) period, followed by a variable fee. This modality has become increasingly popular in 2024, as it allows some security in the short term, with the possibility of taking advantage of Euribor drops in the future.
In July 2024, 74% of new mortgages in Portugal were contracted at a mixed rate, demonstrating consumer confidence in this hybrid model.
6. Home Loan Renegotiation: A Viable Option
With the recent changes in mortgage conditions, many homeowners in Portugal have chosen to renegotiate their contracts. In 2024, there was an increase in renegotiations, totaling 523 million euros in July. Renegotiation allows you to adjust the credit agreement to obtain better conditions, such as lower interest rates or longer amortization periods.
For those who already have a home loan and are feeling the impact of higher interest rates, this can be an attractive option, especially if there is the possibility of switching to a mixed or fixed rate.
7. Future Expectations for the Mortgage Market
Forecasts for the coming months indicate a trend towards stabilization of interest rates, with the possibility of further cuts in Euribor, depending on the ECB's monetary policies. For 2024 and 2025, many economists predict that the ECB may gradually reduce its interest rates, which will have a positive impact on house payments.
Additionally, the credit market is expected to continue to be driven by mixed rates, which offer an intermediate solution for those looking for a balance between security and flexibility.
8. Conclusion
The mortgage loan market in Portugal is constantly evolving. In 2024, homebuyers have more options and greater flexibility to find solutions that best suit their financial needs, whether through fixed, variable, or mixed rates. The key to making the right decision lies in closely following market trends and being prepared to renegotiate the contract when necessary.
Are you interested in learning more about how to take advantage of the best mortgage conditions in Portugal? Contact one of our experts today and find out how we can help you find the ideal financing for your dream home.
