DECIDING BETWEEN A FIXED AND VARIABLE MORTGAGE RATE IN PORTUGAL CAN SAVE OR COST YOU THOUSANDS OF EUROS OVER THE TERM OF YOUR LOAN... FIXED RATE
FIXED RATE
A fixed-rate mortgage allows clients to maintain a consistent repayment amount over the mortgage term.
One important advantage of a fixed-rate mortgage is its protection against fluctuations in the bank’s rate and the European base rate.
However, early repayment of the mortgage incurs a fee of 2% on the repaid capital.
VARIABLE RATE
The variable-rate mortgage is the most prevalent type in Portugal, however, it’s losing supporters lately.
With a variable-rate mortgage, monthly payments vary based on the prevailing interest rate.
How much it changes is based on the Euribor (Euro Interbank Offered Rate).
The regularity with which your rate will be reviewed depends on which Euribor the mortgage is indexed on (3/6/12 months).
The history of the Euribor rate, which influences mortgage rates in Portugal, has seen fluctuations above 5% and, as recently as 2023, rose above 4%, being around 2,548% in 2025. These fluctuations don’t offer you the security that you can be looking for.
Early repayment under a variable rate incurs a charge of 0.5% on the repaid capital.
MIXED RATE
The mixed mortgage combines an initial fixed interest period followed by a variable interest period. The first years of this type of mortgage come with a fixed interest rate, offering stable monthly instalments, followed by a variable period in which the interest rate is linked to a reference rate, such as the Euribor.
• During the fixed interest period, the monthly instalments remain unchanged, which makes financial planning easier.
• Once the fixed period elapses, you can benefit from lower interest rates if reference rates go down.
• Combining fixed and variable rates provides versatility to suit the borrower’s needs.
• Borrowers can limit their exposure to interest rate risk by going for a mixed mortgage.
So, combining them offers the best of both worlds to adapt to borrower’s needs and profiles.
