Falling Euribor rates, advantages for the property market in Portugal.

Euribor rates continue to fall and have room to reach around 2 per cent by the end of 2025, although the fall is expected to be slower than that seen so far. This trend is positive for families with variable-rate mortgages and for those looking for new financing, as banks tend to improve credit conditions in a context of lower interest rates, resulting in more affordable instalments.

In February, the 6- and 12-month Euribor fell below 2.5 per cent, the lowest in nearly two years. In March, the 12-month Euribor fell below 2.4 per cent, reflecting expectations of interest rate cuts from the European Central Bank (ECB), which cut interest rates by 25 basis points at the beginning of March. Analysts expect the ECB´s decision to contribute to a further drop in Euribor, easing the burden on variable mortgage loans. However, the proximity between Euribor and the ECB´s official rate suggests that the fall will be gradual.

Experts expect Euribor to continue falling in the short term, although the future path of the ECB´s interest rate is uncertain, with the possibility of a pause in cuts at the next meeting in April. Despite this, the 12-month Euribor still has room to fall, although it is getting smaller. Optimistic forecasts point to values of between 2.1% and 2.2% at the end of 2025, which would represent a drop of 30 to 40 percentage points.

The reduction in Euribor has a direct impact on mortgage instalments. For example, on a 150,000 euro 30-year loan with a spread of 0.7%, a drop in the 6-month Euribor from 2.46% to 2.25% would reduce the monthly instalment from 645 to 628 euros. If Euribor falls to 2%, the instalment would drop to 608 euros, a significant saving for borrowers.

In addition, the fall in rates has boosted the supply of home loans, particularly mixed rates, which are gaining in popularity. In January, 70 per cent of new home loans in Portugal were contracted at a mixed rate, reflecting the demand for stability in the first few years of the contract. Measures to support the purchase of a first home, such as IMT exemptions and public guarantees, have also contributed to the increase in demand for credit, especially among young people under 35, who accounted for 45 per cent of new contracts in January.

In short, the fall in Euribor and the support measures have benefited the mortgage market, with lower instalments and greater accessibility to credit, especially for young people and families looking for financial stability.

Source: Idealista