Banco de Portugal Readies Macroprudential Tightening as State-Backed Mortgages Push Average LTV Close to 99% — Santos Pereira's Stress-Test Premium May Double Back Toward 3 Percentage Points

Banco de Portugal governor Álvaro Santos Pereira is preparing the first meaningful tightening of the central bank's macroprudential framework for mortgages since the original recommendation went live in July 2018. According to reporting this week by ECO, the regulator is sizing up an increase in the “stress rate” premium applied to loans over ten years, alongside a tougher line on loan-to-value (LTV), debt-service-to-income (DSTI) and maturity limits. The final calibration will be decided by Banco de Portugal's Board of Administration in the coming weeks.

The headline change under discussion is the stress-test premium. Since October 2023, borrowers have been tested against the contracted rate plus 1.5 percentage points for loans over ten years. The regulator is considering moving that back toward the 3 percentage points that applied before. A higher premium means a lower cap on affordable debt for any given household income — and therefore a smaller loan for the same house.

Why Now

Santos Pereira's own reading is that risk on Portuguese mortgage books deteriorated sharply in 2025. Loans that the supervisor classifies as high-risk rose from around 3% of new production in 2024 to 21% in 2025. Mortgages with LTV above 90% — effectively homes bought with a 10% down payment or less — went from 0.1% of new contracts in 2024 to 24% last year. The main driver is Portugal's public guarantee for younger buyers, which allows banks to go up to 100% LTV on primary residences for residents under 36. State-guaranteed mortgages now average 99% LTV, leaving almost no household-side equity cushion.

Banks have also been stretching loan durations. The recommendation requires the average maturity of new mortgages to stay at or below 30 years per quarter; at the end of 2024, that average was 30.8 years, and by Q2 and Q3 2025 it had slipped to 31.9 years. Longer maturities reduce the monthly instalment but push borrowers deeper into retirement before they finish paying — and raise the total interest bill by tens of thousands of euros.

The Governor Versus the Government

The political subtext is unmissable. The Montenegro government has spent the past twelve months expanding the state guarantee: the programme has been extended, its income ceiling widened, and officials have publicly mused about raising the maximum property price it covers. The Banco de Portugal sits inside the European System of Central Banks and, while it coordinates with the Ministry of Finance, sets its macroprudential policy independently. Santos Pereira has said publicly that the problem in the Portuguese housing market is on the supply side, not the demand side, and has pushed back on the idea that more leverage solves anything. He has also argued that the macroprudential framework should become binding rather than a mere recommendation — a step that would require a legislative change.

What Changes for Buyers

For anyone on the edge of signing a crédito à habitação this spring, the near-term takeaway is simple: the envelope is more likely to narrow than to widen. Moving the stress premium from 1.5 to 3 percentage points alone would shave several tens of thousands of euros off the loan a median-income household can carry, at current Euribor levels. The state guarantee will still exist, but banks will have to satisfy a tougher solvency test on top of it.

Expats already inside the system — mortgage approved, contract signed — are unaffected. Those still shopping should assume the Banco de Portugal's announcement, expected within weeks, will pull the maximum loan they qualify for downward, not upward.