Mortgage interest rates at lowest level since October 2023
The implicit interest rate on all mortgage contracts stood at 4.487% in July. For new contracts, it's already at 3.713%, the lowest since April last year.
Interest rates on mortgage contracts fell again in July, making it the sixth consecutive month of falls, although the pace of decline is slowing.
Interest on all loans is now below the 4.5% mark, at the lowest levels since October last year, while rates on new contracts are already at lows of more than a year.
The data was published on Tuesday by the National Statistics Institute (INE), which reports that the implicit interest rate (an indicator that reflects the relationship between the total interest due in the reference month and the capital owed at the beginning of that month) on all mortgage contracts fell for the sixth month in a row in July, standing at 4.487%, which represents a fall of 2.6 basis points on the previous month.
In June, there was a decrease of 4.3 basis points.
With regard to the most recent contracts, the fall was less marked, but the rate reduction cycle is longer in this case.
In July, the implicit interest rate on contracts signed in the last three months stood at 3.713%, down from 3.729% the previous month, in what is now the ninth consecutive drop for these contracts.
The interest rate on new home loans is now at the lowest it has been since April last year.
This trend is occurring at a time when Euribor rates, to which the majority of mortgage contracts in Portugal are linked, have been falling, after the European Central Bank (ECB) began reducing key rates in June.
Explaining the difference between the pace of rate cuts in all housing loans and those recorded only in new contracts is the sharp growth trend in mixed rates (where a lower, fixed rate applies in the first few years of the contract).
At the end of June, around 78% of new home loans were mixed rate contracts, which meant that this type of contract now represents more than 25% of the total home loan portfolio.
Despite the drop in rates, interest remained a significant weight on the total instalment payable by families. In July, considering all home loans, the average instalment increased by one euro and stood at 405 euros (of which 161 euros was capital and 244 euros was interest, one euro less than in June). The average outstanding capital increased by 250 euros to 66,529 euros in the month under review.
The trend in new contracts was identical: the average outstanding capital increased to 127,541 euros, while the average total instalment rose to 611 euros (more than half, or 390 euros, relates to interest only).