Current mortgage interest in Portugal

What you need to know about mortgage rates in Portugal

It is important to read up on mortgage rates in Portugal. This is because these work different from that you are used to in your home country!

Pedro has listed what to consider in case of interest rates issued by a Portuguese bank:

• Residential status - Are you a Portuguese resident or not? If you pay taxes for two years, you are a tax resident of Portugal. You are then allowed to borrow more and you may get a better interest rate.
• Euribor or introbank rate - the interest rate offered is determined by the European Central Bank (ECB) interest rate or by the rate at which banks exchange money to each other. This may differ from current interest rates because an exchange took place earlier than the time of a mortgage application.
• Interest rate expectations & security - if interest rates are stable, banks often dare to give lower mortgage rates. If there is a lot of uncertainty, due to policy changes (e.g. from the ECB), then there is more risk and banks in Portugal will usually issue higher interest rates to hedge themselves.
• Interest types - there can be quite a difference whether you choose a variable, fixed or mixed rate (mixed rate = temporarily fixed, then variable). It depends on market conditions which is more interesting at the time.
• Risk policy - foreign buyers get a risk premium from Portuguese banks. This makes sense, as it is harder to hold you financially responsible if you fail to pay your mortgage repayments. Also, assessing your income (abroad, with a different tax authority) is more complex.
• Insurance & banking products - An important part of the interest rate is whether you purchase additional banking products from the mortgage lender. Think of a bank account, home insurance and life insurance. You don't want this? Then you are guaranteed to be offered a higher interest rate.
• Mortgage amount - The higher the mortgage amount, the more interesting the Portuguese bank finds it. From the bank's point of view, one big mortgage declaration is more interesting than 10 small ones (less administration and risk assessment). So if the mortgage amount is higher and your buying profile can afford it, the more leeway there is to negotiate the mortgage rate.
• Your financial profile - the more financial monthly margin as well as available savings you have, the better you can negotiate with a Portuguese bank. The bank would prefer that you spend as little of your net income on your mortgage as possible, so that you are less likely to become a defaulter in the future.
• Duration - Often shorter maturities are more favourable for the interest rate. The faster the bank gets the money back, the less risk they bear. In fact, the future of interest rates changes regularly over time!
• Loan-to-value - also called the percentage loan to appraisal house. This one is important, because the less you borrow relative to the value; the better your interest rate can be. This is because the bank does not want your home to be "underwater" and not get their money back in case of a forced sale.

Of course, there are plenty of other reasons or causes that affect your Portuguese mortgage interest rates. But if you take the above into account, Pedro can already make a good estimate.