Portuguese Household Debt Grew 10 Percent Over the Year to July, the Fastest in a Bank of Portugal Series That Begins in December 2008

The Bank of Portugal published its monthly indebtedness statistics on Tuesday morning, and one number in them has no precedent in the series. Household debt grew at an annual rate of 10.0 percent in July, the fastest pace recorded since the Banco de Portugal (Bank of Portugal) began publishing the series in December 2008.

The stock itself reached 183,379 million euros at the end of July, up 1,575 million on June and up 16,576 million on July last year. Every month of 2026 so far has set a new record, and every month has come in faster than the one before it: 9.52 percent in March, 9.73 in April, 9.84 in May, 9.89 in June, and now 10.0.

Housing credit is doing almost all of the work

Of July's 1,575 million euro increase, 1,224 million came from loans for housing and 351 million from consumer and other credit. Housing debt alone stood at 121,072 million euros and grew 10.55 percent over twelve months, which is also the highest reading in the series.

Consumer and other credit went the other way. It stood at 62,307 million euros and grew 8.97 percent, down from 9.25 percent in June, which had been that component's own record. So the acceleration in the headline number is a mortgage story, not a story about people borrowing to spend.

Banks and other financial institutions hold 162,531 million euros of the total, up 1,401 million on the month. That is the part of household debt the regulator can steer directly, and it has been trying to. From 1 August the Bank of Portugal cut the maximum debt-service ratio on new loans to 45 percent of net income. July's figures are the last full month before that cap applied.

The ratios tell a calmer story than the growth rate

A 10 percent growth rate sounds alarming on its own, and the longer measures are the reason to be careful with it. Household debt was 57.5 percent of GDP at the end of June, against 55.6 percent a year earlier and 94.4 percent at the end of 2009.

Measured against disposable income, which is the ratio that decides whether a household can actually pay, the figure was 72.3 percent in June, against 69.8 percent a year earlier. Its peak was 113.1 percent in September 2011. Portuguese households are borrowing quickly, but from a position they spent fifteen years climbing down to, and the economy has been growing and employing people while they do it.

What has changed is the price of a house rather than the appetite for debt. Existing homes cost 18 percent more than a year ago on figures published the same morning, so a buyer with the same income and the same deposit now signs for a larger loan.

The rest of the economy went the other way

Total debt across Portugal's non-financial sector fell in July, to 887,574 million euros from 893,460 million. The whole of that 5,886 million euro fall came from the public side, where debt dropped 8,288 million to 386,039 million.

Private-sector debt, meaning households and private companies together, rose 2,402 million to 501,535 million euros, an annual growth rate of 6.89 percent. In other words the state repaid in July and the private sector borrowed, and households were the larger half of the borrowing.

None of this changes an existing monthly payment. It does say something about what a lender will agree to next: banks writing loans at this pace, into a market where prices are still rising at double digits, are lending against valuations that have moved a long way in a short time.