Interest rates for mortgages experience a decrease
Euro Area Mortgage Rates Stabilize Amid Easing Credit Standards and Lower Funding Costs
The average interest rates on new mortgage loans in the euro area have shown little change in recent months, according to data from Q2 2025. The lowest average interest rate on new loans since October 2022 stands at 2.91%.
The use of different Euribor rates influences mortgage interest rates, with the six-month Euribor being the most widely used rate for new mortgage loans in June, accounting for 50.6% of the total for new variable-rate loans. The 12-month Euribor, which was the most widely used in the previous 22 months, accounted for 40.52% of new variable-rate loans in June.
The changing dynamics of Euribor rates, influenced by monetary policy moves and market conditions, affect bank’s cost of funds and hence mortgage rates. The ECB's policy rate cuts, notably lowering the rate to 2.00% in June 2025, have supported an environment of generally lower funding costs for banks, encouraging growth in mortgage lending, especially for fixed-rate periods of five to ten years.
Mortgage credit standards are forecast to ease modestly in Q3 2025, with variations across countries. Banks' credit terms for housing loans remained largely unchanged in Q2 2025, with some expectation of a slight easing of credit standards in Q3 2025, particularly driven by French banks, while German banks expect tightening and others remain stable.
Portugal has the fifth lowest average interest rate among euro area countries, falling below the euro area average. The average monthly instalment on outstanding mortgage loans fell to 413 euros in June, a decrease of one euro compared to May. The average rate for renegotiated contracts fell by 0.13 percentage points to 3.11%, while the average rate for new contracts fell by 0.04 percentage points to 2.87%.
This reflects a cautious but improving outlook for mortgage borrowers amid a complex interplay of monetary policy, Euribor rates, and varying national credit conditions. The overall impact on average mortgage interest rates has been moderate recently, with the average interest rate on new mortgage loans decreasing from 2.97% in May to 2.91% in June.
References:
- Source 1
- Source 2
- Source 3
- Source 4
- Source 5
Portugal's personal-finance sector, specifically mortgage rates, shows improvement as the country has the fifth lowest average interest rate among euro area countries. This decrease, from 2.97% in May to 2.91% in June, follows the easing of mortgage credit standards across the euro area, with a notable contribution from French banks. This development, amid a complex interplay of monetary policy, Euribor rates, and varying national credit conditions, reflects a cautious but improving outlook for Portuguese mortgage borrowers.
