Mortgage credit arrears continued to decline in Portugal in 2025, while consumer credit recorded a slight deterioration, according to the Bank of Portugal’s 2025 Credit Markets Monitoring Report.

In the mortgage market, the default ratio fell further, both in terms of the number of contracts and the outstanding amount. By the end of December 2025, the arrears ratio stood at around 0.1% for owner-occupied housing loans and 0.3% for mortgage credit overall, confirming the continued improvement in the quality of banks’ loan portfolios.

By contrast, consumer credit recorded a modest increase in defaults. As a share of the outstanding amount, the default ratio rose from 1.1% to 1.2%, while, in terms of the number of contracts, it increased from 4.5% to 4.7%.

The figures come in a year marked by a strong recovery in mortgage lending. The total amount of new housing loans rose by 34.9% to €23.4 billion, driven by falling Euribor rates, rising house prices and the impact of the State Guarantee scheme for first-time buyers aged up to 35. The number of new mortgage contracts increased by 11.5% to 133,602, while the average loan amount climbed by 21.1% to €175,141.

At the end of 2025, financial institutions held around 1.33 million mortgage contracts on their balance sheets, representing an outstanding balance of €111.7 billion, up 11.6% from the previous year.

The State Guarantee scheme played a significant role in new lending, accounting for 18.8% of new owner-occupied housing loan contracts and 21.3% of the total amount granted.

Consumer lending also continued to expand during the year. The total amount of new consumer credit increased by 11% compared with 2024, while the average monthly number of contracts rose by 4%. Personal loans and car finance were the main drivers of growth, increasing by 12.7% and 12.2%, respectively, whereas revolving credit posted more modest growth.

Despite the increase in consumer lending, the average Annual Percentage Rate of Charge (APRC) fell to 12.6% at the end of 2025, reversing the upward trend recorded in previous years.

The Bank of Portugal also notes that early repayments and mortgage renegotiations continued to decline. Early repayments fell by 16.2% to 153,092 transactions, following the expiry at the end of 2025 of the temporary suspension of early repayment fees. Mortgage renegotiations dropped by 27%, totalling 45,539 operations.

Original Story: Jornal Económico | Author: Maria Teixeira Alves
Edition and translation: Prime Yield