The ECB Pauses at 2.25%, but $90 Oil Means Portuguese Mortgage Relief Could Prove Short-Lived

The European Central Bank held its deposit rate at 2.25% on Thursday, pausing after June's quarter-point rise — its first increase since 2023 — and leaving Portuguese borrowers with a reprieve that may not survive the summer. The main refinancing rate stays at 2.40% and the marginal lending facility at 2.65%.

The Governing Council had reason to wait. Eurozone inflation slowed to 2.8% in June from 3.2% in May — the first deceleration of 2026 — and core inflation eased to 2.4%. But the bank's own projections still see inflation returning to the 2% target only in late 2027, and the statement carried a warning that "the full inflationary impact of the energy shock has not yet materialised."

Oil is writing the script

That energy shock is the reignited conflict in the Middle East. Crude had slipped towards $72 a barrel after June's short-lived ceasefire; renewed tension between the United States and Iran, and attacks on tankers in the Red Sea, have since pushed it back above $90. President Christine Lagarde was at pains to stress that June's hike and any follow-up would be a response to an actual inflation problem, not a preventive strike — but economists at ING already call a second increase at the September projection round "the most realistic scenario."

The ECB remains a laggard among the big central banks: the US Federal Reserve sits at 3.50–3.75% and the Bank of England at 3.75%, with both due to announce their own decisions next week.

What it means for Portugal

Portugal feels ECB decisions faster than most of the eurozone because a large share of its mortgage stock is variable-rate, indexed to Euribor. Those benchmarks began climbing in the spring in anticipation of the June hike — the three-month rate touched 2.373% in early June, its highest reading since March 2025 — and every reset since has passed the increase into monthly payments. A pause freezes that escalation; a September hike would restart it just as autumn contracts reprice.

The timing also collides with a domestic tightening. From 1 August the Banco de Portugal (Bank of Portugal) cuts the maximum debt-service ratio on new home and consumer loans from 50% to 45% of net income. Higher Euribor plus a tighter affordability test squeezes new buyers from both sides: the same salary borrows less, and the loan it does secure costs more to service.

For savers the picture is friendlier. Portuguese banks were slow to pass 2023-era rates through to deposits, but term-deposit pricing has been inching up since the spring, and a central bank that keeps hiking — or simply keeps the threat alive — gives depositors more leverage than they have had in two years.

The next Governing Council decision, with fresh staff projections, comes in September. Between now and then, the variable that matters most to Portuguese households is not in Frankfurt at all — it is the price of a barrel of Brent.