Variable Rates in Portugal: A Comparative Analysis with Fixed Rates in EU

“Variable Rates in Portugal” are significantly higher than in most other EU countries, causing a sense of uncertainty among families in times of rising interest rates. The nature of variable rate mortgages means that families must adjust their budgets in response to market fluctuations. This has led to a wave of restructuring and renegotiations in recent months as families struggle to make their monthly payments.

According to data from the European Central Bank (ECB), as of May 2023, 73.15% of new housing credit in Portugal was set at a variable rate^1^. Only Estonia (91.20%), Finland (98.10%), Latvia (90.42%), and Lithuania (96.48%) have higher proportions of variable rate loans^2^. Conversely, in Spain, only 22.33% of housing credits are variable, and in Belgium, the figure is even lower at 7.62%^3^.

This striking difference reveals a stark reality. Portugal is a nation where the vast majority of families live with the unpredictability of a variable interest rate^4^. Although studies based on the last few decades suggest that variable rates have been more favorable in the long term^5^, the immediate impact on families’ budgets can be severe.

The breathtaking view of Porto, a city in Portugal, highlighting the attractive real estate landscape despite the ongoing discussion on variable rates.

The Challenge of Fixed Rates in Portugal

Fixed rates in Portugal have always been limited and restricted, often unattractive to many borrowers. Even though the government had mandated banks to provide fixed-rate offers earlier in the year, the response from banks and customers was lukewarm at best^6^. Many customers were lured by the negative Euribor values, failing to hedge their bets against potential rate increases^7^.

According to sources, 90% of the total stock of housing credit in Portugal is at a variable rate^8^Banks rarely proposed fixed rates, and when they did, it was usually for medium-term loans, not covering the full duration of the loan^9^. The significant difference between the monthly payments for variable and fixed rates was a further disincentive^10^.

Understanding the peculiar nature of the mortgage market in Portugal is crucial for prospective homeowners and investors alike. It’s also worth noting the potential tax implications of acquiring property in the country.

A Different Landscape in Belgium and Spain

In contrast to Portugal, fixed rates are very common in Belgium and Spain. In Belgium, the fixed rate is often proposed by banks, and the difference between fixed and variable rates is not as large, which makes it a preferred choice for many people to avoid risk^11^. Additionally, Belgian workers enjoy an annual wage increase in line with inflation^12^.

Spain also demonstrates a strong preference for fixed rates. When buying a house in Madrid, one Spanish couple decided to take out a fixed-rate loan of 1.74% for 20 years^13^. They could have chosen a variable rate, but the sub-2% fixed rate was too good to pass up^14^.

A Path Forward

As Portugal continues to grapple with the challenges of variable rates, it’s crucial for potential buyers to understand the ins and outs of purchasing property in the country. The Portuguese real estate market offers many opportunities, but it also carries potential pitfalls.

With a better understanding of the mortgage landscape in Portugal and the EU, prospective homeowners can make more informed decisions about their future investments. Although variable rates in Portugal remain a concern, there is room for positive change. Continued efforts to encourage fixed-rate loans could lead to increased stability for Portuguese homeowners.

A glimpse into the quaint streets of a Portuguese town, reflecting the serene lifestyle possible despite the economic uncertainties surrounding variable rates in Portugal.

Variable Rates in PortugalPortugal has one of the highest proportions of new housing credits set at variable rates (73.15%) among EU countries.
Fixed Rates in PortugalFixed rates are limited and often unattractive for borrowers due to the significant difference in monthly payments compared to variable rates.
Comparisons with Belgium & SpainIn contrast, Belgium and Spain show a strong preference for fixed rates, given the smaller difference in monthly payments and reduced risk.
Path ForwardThere’s a need for more efforts to encourage fixed-rate loans in Portugal, for increased stability and predictability for homeowners.



1. Why are variable rates more common in Portugal than fixed rates? Variable rates have historically been more favorable in Portugal due to their initially lower cost, driven by the negative values of Euribor. However, this leaves borrowers vulnerable to fluctuations in the Euribor, which can significantly increase their monthly payments.

2. What is the situation with fixed rates in Portugal? Fixed rates in Portugal are limited and often unattractive for borrowers due to the significant difference in monthly payments compared to variable rates. Also, the fixed-rate offerings usually do not cover the full duration of the loan.

3. How do variable rates in Portugal compare with other EU countries? In comparison to other EU countries like Belgium and Spain, Portugal has one of the highest proportions of new housing credits set at variable rates, with 73.15% of new loans in May set at variable rates. Belgium and Spain, on the other hand, show a stronger preference for fixed-rate loans.

4. What impact can variable rates have on borrowers? While variable rates may be attractive due to their initially lower cost, they also expose borrowers to the risk of increased monthly payments if the Euribor increases. This can pose a significant challenge for families with tight budgets.

5. What can be done to encourage more fixed-rate loans in Portugal? To encourage more fixed-rate loans, banks need to make fixed-rate offerings more attractive and accessible to borrowers. Also, regulatory measures can be put in place to protect borrowers from high fluctuations in their monthly payments.