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Luxury property market in the Algarve: Armação de Pêra on the rise.
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Monthly mortgage payments in Portugal will decrease once again in July for loan agreements that are due for review this month, reflecting another drop in Euribor rates. However, the slowdown in the pace of these decreases suggests that the European Central Bank’s (ECB) interest rate cutting cycle may be approaching its end.
Slowdown in Euribor Rates
In June, the average values of the main Euribor rates continued to fall, but less sharply than in previous months:
- 3-month Euribor: smallest drop in the past three months.
- 6-month Euribor: lowest decline in the past five months (currently the most commonly used index in Portuguese mortgages).
- 12-month Euribor: remained unchanged from May, ending a five-month streak of consecutive declines.
Despite this slowdown, monthly mortgage payments will still decrease, since the reference point for adjustment is the rate from three, six, or twelve months ago — when Euribor levels were significantly higher.
Impact on Monthly Payments
Even with the more moderate drop in Euribor rates, the impact remains positive for household budgets. For example:
- For a €200,000 mortgage over 30 years, with a 1% spread and indexed to the 6-month Euribor, the monthly payment will drop by around €60.
- For the same loan indexed to the 12-month Euribor, the reduction will be even greater: nearly €165 per month.
These savings represent meaningful financial relief for many families, especially in a context of continued cost-of-living pressure.
Are Interest Rate Cuts Coming to an End?
After increasing the deposit facility rate to 4% in September 2023, the ECB began a gradual rate-cutting cycle to support the economy as inflation eased following the Ukraine war.
- In June 2025, the ECB cut rates again by 0.25 percentage points, bringing the deposit rate to 2%.
- However, caution prevails: economists surveyed by Reuters between June 18 and 24 indicate limited room for further cuts.
- 53% expect one more rate cut, likely in September.
- Others are divided between the possibility of two additional cuts or no further changes this year.
Conclusion
For mortgage holders, July will bring another reduction in monthly payments, driven by the positive momentum of past Euribor decreases. However, the pace of decline is slowing, signaling a possible stabilization of interest rates by the ECB. For those considering buying a property, keeping an eye on rate developments in the coming months is essential.
