October Brings the Steepest Rise in Portuguese Mortgage Payments for Three Years, About 90 Euros a Month on a Typical Loan

Households whose variable-rate mortgage is due for its periodic review in October are about to see the biggest jump in their monthly payment in three years. According to calculations published by ECO on Wednesday, the rise in Euribor rates through September will make October the month of the sharpest increase since December 2023 for loans indexed to the 12-month Euribor, and since October 2023 for loans on the three and six-month rates.

For a typical loan with 150,000 euros still to repay over 30 years and a bank spread of 1 percent, ECO estimates the increase ranges from 3.76 percent on the three-month Euribor to 14.07 percent on the 12-month rate. On the 12-month index, that takes the monthly payment to about 737 euros, around 90 euros more than before. Nuno Rico, an economist at the consumer association DECO Proteste, told Observador that borrowers on the 12-month rate will feel the change most, with rises of more than 90 euros a month for a typical loan revised in October.

Why the rise is so large

A variable-rate mortgage in Portugal is priced at a Euribor index plus a fixed spread. At each review, which happens every three, six or 12 months depending on the contract, the bank resets the rate using the average of the chosen Euribor over the previous month. A loan reviewed this October will therefore be priced on September's average.

That average has climbed. The European Central Bank raised its key rates by a quarter of a point on 10 September, after a first increase in June, its first rise since September 2023. On Tuesday the six-month Euribor, now the most widely used index in Portuguese home loans, rose to 3.103 percent, its highest since September 2024. In August the monthly averages were 2.513 percent for three months, 2.713 percent for six months and 2.954 percent for 12 months.

The 12-month contracts are hit hardest because their last review took place a full year ago, when rates were much lower. Loans on the shorter indexes have already absorbed part of the increase in earlier reviews.

The figures are still provisional. September's averages will only be final once Wednesday's fixing is published, and the exact change for each family depends on the outstanding balance, the remaining term and the spread in the contract.

Who is affected

Bank of Portugal data for July show that the six-month Euribor was the index on 39.87 percent of variable-rate loans for permanent homes, the 12-month rate on 31.26 percent and the three-month rate on 24.40 percent. A growing share of borrowers have fixed or mixed rates and are protected for now, but many mixed-rate loans taken out in recent years carry a fixed period of only two or three years, which means some have already moved, or are about to move, onto a variable rate.

Christine Lagarde, the ECB President, signalled on Monday in her regular hearing at the European Parliament that the bank does not expect to raise rates again at its next meeting, on 28 and 29 October. That may slow the climb in Euribor, but it will not reverse the increase already built into September's average.

What borrowers can do

Borrowers can find their review date and index in their loan contract or the bank's pre-contractual information. DECO has advised families facing sharp rises to talk to their bank about renegotiating, for example by extending the term or switching to a mixed rate. Portuguese law requires banks to assess and propose solutions when a customer shows signs of difficulty in keeping up payments, before any default occurs.

For savers there is a flip side: the base rate on new Series F savings certificates (Certificados de Aforro) has reached its 2.5 percent ceiling and stays there for subscriptions made in October.