The Portuguese mortgage market has been adapting to the country’s economic reality, marked by increasingly expensive homes for sale, low savings, and low wages.
It is in this context that the vast majority of housing loans granted in Portugal at the beginning of 2026 have financing above 80%, a trend driven by the public guarantee that provides 100% loans to young people, according to a report by idealista/créditohabitação. However, this high level of financing, combined with high debt-to-income ratios, long terms, and high house prices, is worrying the Bank of Portugal.
To gain access to homeownership in Portugal, families tend to request higher financing rates from banks to buy a house. At the beginning of 2026, “around 16.5% of housing loans were financed between 80% and 90%, and 51% corresponded to youth financing at 100%”, reads the quarterly report from idealista/créditohabitação.
This data show that, in the first quarter of 2026, the majority of new housing loans (a total of 67.6% of finalised contracts) had financing above 80%. And more families are requesting financing percentages from banks above this level (+10.9 percentage points) compared to the same period last year.
This increased proportion of high-value financing in housing loans can be explained by a set of factors, according to the same data in the report:
High uptake of the public guarantee for young people up to 35 years old: this public aid allows for 100% bank financing for the purchase of a primary and permanent home. At the start of this year, more than half of the loans finalized by idealista’s credit intermediaries had a state guarantee. A year earlier, this percentage was only 13.5%, and the measure had just started;
Families with lower salaries lead loan applications: at the beginning of 2026, almost three out of four housing loans in Portugal were contracted by families with salaries in the lowest brackets (up to €4,000) and, therefore, less room to accumulate savings for a down payment, which increases financing;
House prices on the rise: the prices of houses for sale have been rising at a much faster rate than family salaries. To gain access to housing, households end up having to borrow more money from the bank. At the beginning of 2026, the average purchase price was €254,365 and the requested mortgage loan was almost €211,000, with an average financing rate of 86% (5 percentage points higher than a year ago).
Furthermore, there is currently strong competition among banks in granting housing loans, so financing higher percentages can be a way to attract clients, as long as it is within the limits defined by the Bank of Portugal (BdP) – up to 90% for the purchase of a primary and permanent home, with the exception of the public guarantee that allows financing up to 100% for young people.
On the other hand, the risk for banks is now more controlled with the combination of other macroprudential rules of the BdP, such as the debt-to-income ratio of up to 50%, maximum maturity, and stress tests to create scenarios for future interest rate increases (up to 1.5%).
It should be noted that the rise in interest rates is already being felt due to the instability in financial markets generated by the war in the Middle East, with an increase in key interest rates by the European Central Bank anticipated in June.
Having high levels of bank financing for housing, above 80%, does not necessarily mean greater systemic risk, since it is within the macroprudential recommendation of the Bank of Portugal (up to 90%) and public guarantee. However, the regulator, led by Álvaro Santos Pereira, has shown concern about the increased risk of loans, given the combination of several factors: high financing levels, high debt-to-income ratios, long terms, and overvalued house prices.
It is in this context that the Bank of Portugal is preparing to tighten the maximum debt-to-income ratio limit from the current 50% to 45%, according to the Jornal de Negócios newspaper. This is expected to curb the granting of housing loans, especially to more vulnerable families, as explained in this article prepared by idealista/news. Also under consideration is the review (and tightening) of the maturities of these loans.
Source: Idealista.