Real Estate 1 August 2026

Portugal's mortgage rules changed on 1 August and the affordability cap drops to 45%

The Bank of Portugal's new recommendation cuts the debt-service ratio from 50% to 45%, trims exceptions to 10% and ends 100% financing on bank-owned property. In force since 1 August.

Anyone filing a mortgage application from today is measured with a different ruler: the recommended maximum debt-service ratio has fallen from 50% to 45%. In plain terms, the bank now wants your combined monthly loan payments to eat no more than 45 cents of every euro coming in.

What is the debt-service ratio and where is it now?

It is the share of monthly income tied up in loan repayments — mortgage, car, cards, all of it added together. The Bank of Portugal used to recommend a 50% ceiling and has cut it to 45%, and the same limit applies to personal loans. For a household on 2,500 euros net, the cap on repayments moves from 1,250 to 1,125 euros a month.

Have the exceptions gone?

They have shrunk rather than vanished. Banks could breach the limit on 15% of new loans each half-year; now it is 10%. That slack exists for cases with stronger collateral or unusually solid profiles, and it just became a lot more contested.

What is the maximum mortgage term now?

It went up in one bracket and down in another. Borrowers aged 30 to 35 see the recommended maximum term rise from 37 to 40 years. Anyone over 35 is capped at 35 years. The trade is deliberate: stretch the repayment for people with more working years ahead, tighten it for those coming to a mortgage later.

Can you still get 100% financing on a bank-owned home?

Not any more. Financing the full purchase price of property held by the banks themselves is out — a practice used to shift portfolios of repossessed homes. Those deals now fall under the same general 90% loan-to-value limit as any other house.

One detail decides a lot: the new recommendations apply to contracts whose creditworthiness assessment is carried out from 1 August 2026. If your application was assessed before that date, the old rules still hold, even if you sign the deed later. The macroprudential recommendations in force are published on the Bank of Portugal website, and anyone stacking this against state support should read our guide to Portugal’s young-buyer mortgage and public guarantee.

By Duarte Figueiredo

Image: Béria Lima de Rodríguez / Wikimedia Commons (CC BY-SA 3.0)

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