Interest Rate on Mortgage Loans Drops Further to 4.513% in June

The average interest rate on mortgage loans fell to 4.513% in June, reflecting an improvement in financing conditions.

25 Jul 2024 min de leitura

The average interest rate on new mortgage credit contracts in Portugal recorded a new reduction in June 2024, settling at 4.513%. This decrease reflects the trend observed in recent months and provides significant relief for many consumers who faced high real estate financing costs.

According to the latest data from the National Institute of Statistics (INE), the average interest rate for new mortgage credit contracts experienced a notable decrease compared to the previous month. In May 2024, the rate was 4.654%, representing a reduction of 0.141 percentage points in June. This continuous decline in interest rates is particularly significant considering that, over the past eight months, the interest rate on new mortgage credit contracts has been consistently decreasing.

Appreciable Drop in New Mortgage Credit Interest Rates and Effects on Installments

In recent months, the recent decreases in the Euribor and the trend of opting for mixed-rate mortgage credits have contributed to a substantial reduction in the interest rates applied to new contracts. In June, the average rate for new mortgage credits was 3.729%, following a decrease from 3.845% in May. This cumulative reduction of 65.1 basis points since the peak in October 2023 demonstrates a significant improvement in financing conditions.

Regarding contracts for housing acquisition, the interest rates have also shown a continuous downward trend, settling at 3.706% in June, representing a decrease of 12.0 basis points compared to the previous month. This prolonged decrease has been crucial in reducing house installments.

Consequently, for contracts signed in the last three months, the average installment amount dropped to 597 euros in June, reflecting a decrease of 6 euros compared to the previous month and a reduction of 2.0% compared to the same month last year. This drop in installments is a direct reflection of the more favorable conditions offered by new credit contracts.

Analysis of Mortgage Credit Installments in June: Stability in Value, but Significant Annual Increase

Despite the reduction in interest rates, the average house installment amount in June 2024 remained at 404 euros, matching the amount observed in the previous month. This stability in the installment reflects the detailed composition of payments, which is divided as follows:

- Principal Amortization: 159 euros, representing 39% of the total installment value.
- Interest Payment: 245 euros, corresponding to 61% of the total.

It is relevant to note that, despite the stability compared to the previous month, the average house installment amount remains significantly higher compared to last year. In June 2023, the average installment was 361 euros, meaning the current cost is 11.9% higher, resulting in an average increase of 43 euros. At that time, the interest component represented 53% of the average installment.

Moreover, the bulletin reveals that the average outstanding principal for all mortgage credit contracts recorded a considerable increase in June 2024, rising to 66,279 euros, an increase of 355 euros compared to the previous month. This increase in outstanding principal highlights the growing financial burden on borrowers, reflecting the ongoing challenges associated with mortgage credit.

Impact and Future Prospects

The evolution of interest rates has been a constant concern for the Portuguese, as the value of monthly installments can significantly influence household budgets. The decrease observed in June may provide some financial relief to new mortgage credit clients and contribute to a slight recovery in the real estate market.

In summary, the decrease to 4.513% offers a positive signal during a period of economic uncertainty and may have a beneficial impact on the demand for mortgage credit. However, maintaining this trend will depend on various economic factors, including future decisions by the Central Bank and the evolution of global financial markets.

Text Adapted from Idealista