Foreigners boost home loans in Portugal: where are they from?

The era of the cheapest mortgages ever in Europe came to an end in 2022, after interest rates on home loans on the continent rose to the highest levels in decades, due to high inflation. But this hasn't stopped the demand for mortgages to buy a house in Portugal. In fact, the most recent data from the Bank of Portugal shows that 169 thousand people took out mortgages in Portugal last year - 2 thousand more than in 2021 (and the total amount borrowed also went up by around 14 per cent).

Although most of the credit continues to be granted to Portuguese people, national demand contracted during the past year. And it was foreigners who were responsible for boosting the mortgage market in 2022. Brazilians led the credit to buy a house in Portugal granted to foreigners, while Angolans, Americans, British and Ukrainian citizens make up the top 10 nationalities that signed most new mortgage contracts in Portugal 2022.

Fewer Portuguese people are applying for home loans

The year 2022, marked by a scenario of economic and financial uncertainty, ended with a slowdown in demand for home loans. But the truth is that the annual balance was quite positive: data from the Bank of Portugal, published at the end of February, revealed that 16 billion euros were granted in mortgage in Portugal during 2022, a figure 14% higher than a year earlier. And there were also more households taking out loans to buy homes in Portugal: 169,000 people in 2022, compared to 167,000 in 2021 (+2,000 people).

But who were these mortgages granted to? Although the vast majority of home loans have been granted to the Portuguese (about 90%), the truth is that they were not responsible for boosting demand in this market in 2022. The same data reveals that almost 153,000 Portuguese citizens requested loans to buy a house last year - two thousand less than in 2021. This means that foreigners were actually responsible for the increase in interest in taking out home loans during 2022.

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It should be remembered that the Portuguese saw their purchasing power crushed in 2022 by the high inflation catalysed by the war in Ukraine. And as if that wasn't enough, they were penalised by the rise in interest rates on mortgages - which were previously at historic lows - at high speed throughout the year as the European Central Bank (ECB) increased key interest rates to curb inflation in Europe. In addition, the criteria for granting loans to buy houses were tightened (albeit slightly). All this context has made access to mortgages more difficult, especially for Portuguese people, who have a much lower income level than foreigners - even though both work, above all, as employees, and most have a higher level of education.

In this context, to which can be added the rise in prices of houses for sale, the Portuguese who decided to go ahead with the purchase of a house in 2022, resorting to bank financing, did so for a higher average amount. Banks granted an average of almost 90,000 euros to each Portuguese citizen in 2022, which is 12% more than in 2021.

Foreigners boost mortgages in Portugal

A detailed analysis of the socio-demographic data of people who took out mortgages in 2022 shows that it was really foreigners who were responsible for boosting this market. This is because there were more foreigners asking for loans to buy houses in the country in 2022 than a year before. In 2021, around 12,000 foreigners took out loans, a number that rose to 16,000 in 2022 (+4,000 people).

This figure therefore counterbalanced the fall in demand from the Portuguese (-2,000 people), resulting in that overall positive leap of 2,000 people applying for home loans in Portugal in 2022 compared to the previous year.

"In general, the Portuguese banking sector is receptive to granting mortgages to non-residents wishing to buy property in Portugal. Given that a significant slice of foreigners earn a higher income than national citizens, fewer have found it impossible to use mortgages due to the increase in the effort rate after the rise in interest rates," explains Miguel Cabrita, the head of idealista/créditohabitação in Portugal.

But who are these foreigners? Brazilians were the ones who signed the most home loans in Portugal during 2022, representing 29% of foreign debtors. Next up are Angolan, US, British and French citizens, indicate the BdP data.

The amount of housing loans granted to foreigners also increased between these two points in time: from 1.5 billion in 2021 to 2.2 billion in 2022. This means that in 2022, 14% of the total amount allocated to home loans was allocated to foreigners (3 percentage points more than a year earlier). International citizens asked, on average, for more capital to buy a house last year (139 thousand euros) than a year before (around 125 thousand euros) - both values are much higher than those granted to the Portuguese (on average).

Looking at the nationalities of the foreigners who requested the largest sums in mortgage loans, Brazilians are in first place, followed by the British, North Americans and French, data from the Portuguese regulator shows.

Miguel Cabrita also reminds us that the process of granting home loans to foreigners can be made easier with the help of specialised professionals. "The role of a credit intermediary can be important for residents and even more so for non-residents, either because of their knowledge of the market or because of distance management. Professional and personalised support helps to make a complex process seem simple and with little bureaucracy", Cabrita also highlights.

Who are the foreigners taking out mortgages in Portugal?

We already know the top 10 foreign nationalities to whom most home loans were granted in Portugal in 2022. But who are they, specifically? How old and educated are they? What is their region of residence in Portugal? To answer these questions, idealista/news took a closer look at the data from the platform created by the Bank of Portugal, which reveals the socio-demographic characteristics of people who took out a mortgage in 2022. We explain everything based on the number of foreigners who were granted home loans in Portugal during 2022.

Brazilians lead the way

Around 29% of the 16 thousand foreigners who took out mortgages in 2022 came from Brazil, a country that is currently experiencing a climate of instability and insecurity. The majority of Brazilians (55%) who took out credit are aged up to 40, with the most significant age group being between 31 and 40. The majority are employed and also have higher education. The data also reveals that 44% of Brazilians who took out a mortgage live in the Lisbon Metropolitan Area, 33% in the North and 14.5% in the Centre.

Angolans who live in Lisbon are in the majority

Angolans were the second highest number of people who took out mortgages in Portugal in 2022, with 1,610 people of this nationality. Around 49% of Angolans who took out loans were up to 40 years old and another 40% were between 41 and 50 years old. The majority had higher education (64%) or secondary education (24%) and were mainly employed. It is clear that the overwhelming majority of Angolan families who applied for mortgages lived in the Lisbon Metropolitan Area, the data show.

North Americans who take out mortgages are mainly between 41 and 60 years old

It is not news that now the dream of many US citizens is to buy a house in Portugal, as reported by idealista/news. The motivations for these American families are many, from the climate, quality and cost of life that Portugal offers, to security, education and health. And now, there is also the appreciation of the dollar against the euro, which makes the price of houses in Portugal even more affordable for Americans.

Data from the Bank of Portugal shows that demand for home loans by US citizens was very active in 2022, as they represent 7% of the 16,000 foreigners who took on debt in the country with the aim of buying a house. It was, above all, US citizens aged between 41 and 60 years old who borrowed the most (63%). As with other nationalities, the majority have higher education (70%) and are employed (62%). Only 9% admitted to being retired.

The North Americans who took out a mortgage in Portugal last year had houses in various regions of the country. The most significant area of residence is the Lisbon Metropolitan Area (41%), followed by the Algarve and the North (both with 19%) and the Centre (16%).

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Brits living in the Algarve are the ones who ask most for mortgages

British citizens have been buying houses in Portugal for several years. And they remain very active in the search for a house in Portugal, as a result of Brexit and the governing instability that the country's exit from the European Union brought. Resorting to a mortgage in Portugal was an option for at least 1,100 Britons in 2022, with the vast majority (60%) aged between 41 and 60. Only one in three were up to 40 years old.

The British citizens who borrowed in Portugal were also mainly employed and had higher education. As one would expect, British residents in the Algarve were those who borrowed most to buy a house (42%), followed by those living in Greater Lisbon (35%).

Ukrainian citizens took out mortgages all over the country

The demand to buy a house in Portugal from Ukrainians increased in 2022, following the armed conflict that broke out a year ago (on 24th February 2022). Families today seek to live in a climate of peace and well away from the war. And many have decided to go purchase property in Portugal and take out a mortgage. Ukrainian citizens represent 2% of the 16 thousand foreigners who bought property in Portugal in 2022.

The majority of people from Ukraine who took out mortgages were up to 40 years old (around 36% were between 31 and 40 years old) and were employed. And - unlike the other nationalities - about half of them had secondary school education and 37% higher education.

Of the Ukrainian citizens who took out home loans in 2022, 38% lived in Greater Lisbon, 31% lived in the Centre and 14% lived in the Northern region of the country. Another 10% of the Ukrainian citizens who took out a mortgage lived in the Algarve and 6% in the Alentejo region.