The latest data from the Bank of Portugal shows a continued easing in the country’s housing loan market. In September 2025, the average interest rate on new mortgage loans—including renegotiations—dropped again to 2.84%. This marks the lowest level seen since October 2022 and highlights a period of consistently easing borrowing costs for homebuyers in Portugal.
Monthly Decline Reinforces Downward Trend
Compared to the 2.88% registered in August, September’s rate represents the 22nd decrease in the past 23 months. The only exception in this nearly two-year trend was in January 2025, when rates saw a modest uptick of just 0.03 percentage points.
For the first nine months of 2025, the average interest rate on new mortgage loans has fallen by a notable 0.36 percentage points. This gradual decrease has offered some relief to both new buyers and those renegotiating existing home loans, amidst broader economic uncertainty across Europe.
Growth in New Home Lending
In September, Portuguese households signed new loan contracts (including new and renegotiated agreements) worth €3.41 billion, up €364 million from August. Of these, new contracts for home purchases reached €2.08 billion, an increase of €312 million, reflecting growing activity and confidence in the property market.
Consumer loans also showed a slight decrease in rates, falling to 8.76%, while loans for other purposes dipped to an average of 3.51%. Renegotiated household credit amounted to €483 million, slightly less than the month prior.
Mixed-Rate Mortgages Now Dominate Market
A significant shift in Portugal’s housing loan landscape is the preference for mixed interest rate mortgages. In September, 71% of all new home loans were signed with a mixed rate structure—where borrowers lock in a fixed rate for an initial period before switching to a variable rate. These loans now represent 41% of the total outstanding housing loan stock.
The average interest rate on new mixed-rate loans was 2.74% (down 0.02 percentage points from August). By contrast, the average rate on new fixed-rate loans edged up to 3.46%, remaining above that of variable-rate offerings, which dipped to 2.80%.
Monthly Payments Edge Higher Despite Falling Rates
Despite these lower interest rates, the average monthly installment for outstanding housing loans rose to €413 in September. This marked the first monthly payment increase since April 2024, suggesting that while rates are falling, other factors such as growing loan balances may be impacting household budgets.
Corporate Lending Sees Modest Uptick
For Portuguese companies, average interest rates on new loans in September climbed by 0.05 percentage points to 3.59%. This was driven mostly by increased rates on loans above €1 million. In total, companies secured €2.21 billion in new loans, a rise of €174 million from the previous month.
Portugal’s mortgage market is showing promising signs for homebuyers, with continued declines in interest rates on new housing loans and an ever-increasing share of borrowers opting for the flexibility of mixed-rate mortgages. While average monthly payments have ticked up, the overall lending environment remains favorable. These trends underscore Portugal’s ongoing appeal for homeownership and real estate investment as interest rates reach their lowest levels in nearly two years.
