Fixed rate or variable rate mortgages: which is the best option when buying a house in Portugal?

Photo by Charlotte Harrison on Unsplash
Photo by Charlotte Harrison on Unsplash
20 August 2020, Redaction

One of the big questions that arises when buying a property in Portugal, and indeed across the world, is what kind of housing credit is best? Is it better to have a variable rate loan or a fixed rate loan? The answer will depend on the mortgage conditions of the financial institution and the market situation. Since this is probably the most important contract a person will sign in their life, this is a decision that should be made carefully and with some thought. Let's have a look at the different options and advice from idealista's mortgage department in Portugal, idealista/créditohabitação.

Variable rate mortgages: currently, the Euribor, which is the benchmark for most housing loans and what variable rate loans depend on, is at historic lows. However, it is expected to increase gradually until it stabilises at positive values. Although no significant increase in these indices is expected in the short term, it should not be forgotten that over the last decade values above 5% were reached. 

Fixed rate mortgages: contracting this type of loan gives the client the security that they will always pay the same instalment from the first to the last month, something which allows mortgage holders to organise their finances, without depending on the evolution of the Euribor in the market. The counterpoint to this advantage is that any product that protects the client from risks has higher interest rates than those associated with the variable type. 

Which one should I choose? "The answer depends on each client's situation. Experts insist that the most appropriate loan depends on variables such as the amount of income you want to allocate to the housing loan instalment, the term in which you want to pay the loan, the possibility to improve your medium-term income or the percentage of the purchase you want to finance," add mortgage experts at idealista.

Referrer media
Ready to find the house of your dreams?

Ready to find the house of your dreams?

Find houses for sale and long term rentals on idealista