Portugal Adds €750 Million More to Its Youth Housing Guarantee — And the Bank of Portugal Warns High-Risk Mortgages Have Multiplied Sevenfold Since 2024

The Portuguese government is adding €750 million to its youth housing guarantee scheme, bringing the total state-backed envelope to €2.3 billion. The expansion — first reported by ECO on Tuesday 21 April 2026 — lands at the same moment the Bank of Portugal is warning that the exact category of credit the guarantee unlocks has multiplied sevenfold since the programme launched.

For any foreigner under 35 thinking about buying a first home in Portugal, the top-up means the zero-down-payment route stays open through 2026 and into 2027. For the Portuguese state and its banking supervisor, it means the biggest government-backed mortgage experiment in a decade is about to scale again.

What the Guarantee Actually Does

The scheme — created by Decree-Law 44/2024 in July 2024 and run jointly by the Ministry of Finance, the Ministry of Infrastructure and Housing and IGCP (the state debt agency) — gives a public guarantee of up to 15% of the property value to Portuguese residents under the age of 35 buying their first home. That 15% state backstop, on top of the 80–85% a bank will normally lend, is what lets eligible buyers close a mortgage with no down payment at all.

The core parameters have not changed with the top-up:

• Age cap: buyer must be 35 or younger.
• Residency: tax residency in Portugal required; the buyer must not previously have owned property.
• Property value: capped at €450,000, with the home acquired as habitação própria permanente (primary residence).
• Income bracket: buyer's income must fall within the 1^st to 8^th IRS brackets — effectively a taxable income ceiling of roughly €81,199 in 2026.
• Stamp duty and IMT exemption: under the Mais Habitação regime, first-home buyers under 35 also pay zero IMT and zero Imposto do Selo on the first €324,058 of property value.

The effect is that a 33-year-old on a net salary of €2,200 can buy a €320,000 apartment in the Lisbon periphery or an €280,000 house in Porto's Matosinhos without touching a down payment — provided the bank's affordability test clears.

Where the €750 Million Comes From

The €2.3 billion headline is the new gross ceiling on the state guarantee, up from the €1.55 billion in the previous envelope. The increase will be operationalised via an amended guarantee protocol signed with participating banks — CGD, Millennium BCP, Novobanco, Santander Totta, BPI, Banco CTT and Bankinter are all in — and a new ceiling set through portaria rather than a primary-legislation reopening, which would have required Parliament.

Government sources tell ECO the increase reflects absorption faster than Finance projected: roughly three-quarters of the original €1.55 billion envelope has been contracted in under 21 months, which would have exhausted the scheme well before the programmatic end of 2028 without a top-up.

The Bank of Portugal's Sevenfold Warning

The problem, as the Bank of Portugal's supervisory arm set out in its macroprudential report for the first quarter of 2026, is that the growth of the guarantee has been matched by a growth in what the supervisor calls crédito de risco elevado — high-risk credit. The specific definition: mortgages written with a loan-to-value above 90% and a debt-service-to-income ratio above 50%.

According to the supervisor's data, this category has grown approximately sevenfold since 2024, from a low base to a materially visible share of new housing credit in 2025 and early 2026. The sensitivity is that this is precisely the risk bucket the guarantee unlocks — borrowers who could not otherwise obtain a mortgage at the required LTV are exactly the population the state is now back-stopping.

The supervisor's recommendation letter ahead of the 27 June 2025 Council of Ministers meeting warned of a "build-up of potentially vulnerable borrowers in a future downturn", and recommended that the guarantee be tightened rather than expanded if absorption continued at pace. That advice was not accepted; the government has now moved in the opposite direction.

The Political Case for Expansion

The political calculation is straightforward. Housing remains the number-one voter concern in every Aximage and Intercampus barometer of 2026 — ahead of immigration, cost of living and healthcare. Prime Minister Luís Montenegro's Aximage disapproval has hit a nine-month high, and the government is defending a two-seat plurality in a fractured Assembly.

The youth housing guarantee is one of the very few housing instruments the government can expand by portaria without reopening the wider Mais Habitação package to Parliament, where PS, Chega and the left flank would compete to rewrite it. A top-up of the envelope is effectively the path of least political resistance.

Housing Minister Miguel Pinto Luz's team framed the move to ECO as a natural extension of a scheme "que está a funcionar". In terms of raw absorption, they are correct: roughly 11,000 young buyers have contracted a guarantee-backed mortgage since August 2024, with an average property value of €232,000 and an average guarantee draw of €34,800.

What It Means for Foreign Buyers Under 35

The scheme is, by law, available to anyone who is a tax resident in Portugal — nationality is not a restriction. In practice, that means any foreigner under 35 who has moved to Portugal under a D7, D8, EU-citizen residence certificate or the Golden Visa residency track and has declared tax residence in Portugal (with a Portuguese NIF configured as residente) qualifies on paper.

Where the mechanics tighten:

• Income history. Banks require at least 12 months of Portuguese tax records (IRS declarations or recibos verdes), and most will not accept purely foreign-source income for the affordability calculation. For a newly arrived foreigner, that pushes the realistic application window to the second full tax year.
• First-time-buyer test. The guarantee bars anyone who has previously owned property anywhere, including in their country of origin. Finanças cross-checks with the property registry and, increasingly, with self-declarations on IRS Anexo G.
• Price cap mathematics. The €450,000 property-value ceiling and the IMT/Selo exemption cap at €324,058 mean the sweet spot is in the €240–320,000 bracket — a slice of the market that has thinned materially in central Lisbon and central Porto and widened in the Almada, Barreiro, Braga, Setubal and Vila Nova de Gaia corridors.

The Risk Map

The Bank of Portugal's critique is not only about the borrower. It is also about the stress transmission. A 100% LTV at origination means any price correction leaves the bank immediately under water — legally cushioned by the state guarantee but operationally complicated if loss-absorption were to be called on 11,000+ loans simultaneously. The guarantee has not been called at scale yet: default rates on the 2024 cohort are below 1% at the 20-month mark. But the supervisor's point is precisely that the cohorts entering now, at the top of a rising-price cycle, carry different risk than those who entered in the first weeks of the scheme in 2024.

The second concern is more subtle. A 7x rise in high-risk credit changes the quality of mortgage books at participating banks. Basel III finalisation and MREL requirements become sensitive to that mix. The Single Supervisory Mechanism is, according to Banco de Portugal briefings, now looking at Portuguese participating banks' RWA densities with fresh eyes.

What Happens Next

• The portaria expanding the guarantee to €2.3 billion is expected in the Diário da República within the week.
• Participating banks will sign the amended guarantee protocol with IGCP on the same timeline. CGD and Millennium BCP are expected to lead origination volume.
• The Bank of Portugal is expected to revisit its macroprudential recommendation at the June 2026 Financial Stability Report — the tool available under the CRD IV/V framework is a sectoral systemic risk buffer, which has never been activated in Portugal.
• Parliament's Budget and Finance Committee is likely to call Miguel Pinto Luz and the Bank of Portugal vice-governor Clara Raposo to explain the expansion — the request has been tabled by BE and Livre as of Tuesday afternoon.

Housing affordability remains the political fault-line of 2026. The expansion of the youth guarantee is the clearest signal yet that the government is willing to use the state's balance sheet as the main tool on demand-side housing — even when its own banking supervisor has flagged the downside. Whether that bet pays off will not be obvious until the first real downturn tests the 11,000-plus loans already written.

Sources: ECO ("Jovens recebem mais €750 milhões em garantias para comprar casa", 21 April 2026, exclusive); Banco de Portugal macroprudential recommendation letter (27 June 2025) and Financial Stability Report (November 2025); Decreto-Lei 44/2024 of 24 July 2024; Portaria 215/2024; Diário da República 1° série; Ministério da Infraestrutura e Habitação public materials; IGCP public operational reporting on the guarantee scheme.