Mortgage interest rates hit their highest since March 2009

The hidden interest rate on home loan contracts rose again in August to 4.089%, the highest since March 2009, the National Institute of Statistics (INE) said on Tuesday.

In July, this value was 3.878%, also according to the Institute of Statistics.

The average mortgage payment in August was €379, nine € more than in July and €111 more than August 2022 (up 41.4% year on year).

The interest portion was 57% of the average payment (216 euros), while in August 2022 this share was only 19%, and amortized capital was 43% (163 euros).

For contracts concluded in the last three months, the interest rate rose from 4.173% in July to 4.331% in August, the highest since April 2012.

In these contracts, over the last three months, the average payment increased by 19 euros compared to the previous month and amounted to 623 euros (an increase of 40% compared to August 2022).

In August, the average outstanding capital across all contracts was €63,740, an increase of €185 on the previous month. Under contracts over the past three months, the average amount of debt decreased by 134 euros compared to July and amounted to 122,964 euros.

Raising interest rates by the European Central Bank (ECB) to curb inflation has an impact on home lending, increasing the price of contracts and therefore the monthly payments paid to the bank.

This week the government is expected to approve new measures to support families with home loans, including a mechanism (a kind of moratorium) in which families are likely to pay less in installments to the bank over two years than if the entire mortgage rises in interest the bets were reflected, deferring the payment of the shortfall to a future date.

This mechanism is still under development and collaboration between the government and the Bank of Portugal. Consultations have already been held with banks on this matter.