Banco de Portugal’s latest data shows a slight slowdown in mortgage credit, yet real estate lending remains historically high and competitive.
In the latest release from Banco de Portugal, the data concerning credit extended to individuals presents a nuanced picture of the mortgage sector. While there is a discernible deceleration in overall lending activity, the figures remain robust, particularly within the realm of real estate financing.
In November, the total volume of new loan operations directed at individuals reached an impressive 2,982 million euros, albeit reflecting a modest decline of 106 million euros from the preceding month. Notably, real estate credit continues to assert its prominence, with new contracts amounting to 1,667 million euros. This figure is particularly striking as it marks the second highest level recorded since the inception of the historical series in December 2014, underscoring the enduring resilience of the Portuguese real estate market.
The regulator’s report further elucidates that borrowers aged 35 and under accounted for a significant 48% of the new contracts for permanent home ownership in November. This demographic trend is indicative of a younger generation increasingly engaging with the housing market, perhaps buoyed by favorable lending conditions.
Moreover, the average interest rate on new real estate credit operations has experienced a decline, dipping from 3.4% in October to 3.29% in November. This marks the lowest interest rate observed since January 2023, providing a glimmer of optimism for prospective homeowners. In tandem, the average monthly installment for housing loans has decreased by a mere 3 euros, settling at 417 euros in November, which is the lowest figure recorded since November 2022.
When contextualized within the broader European landscape, Portugal’s mortgage conditions remain notably competitive. The Bank of Portugal highlights that the nation boasts the seventh lowest average interest rate in the euro area, which stands at 3.44%. This competitive edge is crucial as it positions Portugal favorably against its European counterparts.
Additionally, Banco de Portugal has noted a 4.8% reduction in the volume of credit renegotiations, which totaled 559 million euros in November. This decline is particularly pronounced in the realm of mortgage loan renegotiations, which saw a decrease of 27 million euros.
Interestingly, there appears to be a discernible shift in borrower preferences, with a growing inclination towards mixed-rate loans. In November, a substantial 76% of new mortgage loans were secured at a mixed rate, although this figure reflects a slight decrease of one percentage point compared to October.
While the Portuguese mortgage market is experiencing a slight slowdown, it remains characterized by historically high levels of activity and competitive interest rates, particularly for younger borrowers. The interplay of these factors continues to shape the landscape of real estate financing in Portugal, offering both challenges and opportunities for stakeholders within the sector.
