New mortgage lending grew almost 35% in 2025 and the average loan hit a record. Personal loans rose too. Good news or bad? It depends on what you do with your instalment.
The Banco de Portugal numbers
In 2025 banks granted €23.4 billion in new mortgages, 34.9% more than in 2024. The average loan rose to €175,000, the highest ever. About 21% of that new lending went to young buyers using the public guarantee.
In consumer credit, personal loans grew by around 13% in amount compared with the previous year. Close to half of consumer credit in mid-2025 went to buying cars, mostly used, with an average contract of around €15,000.
Why it happened
- The Euribor fell for much of 2025 and eased instalments, giving many families breathing room.
- The public guarantee and the IMT exemption for young buyers brought people into the market who previously could not save the deposit.
- House prices kept rising, so each loan is bigger.
- Banks and finance companies competed harder, with fast approvals and purpose-specific products.
Credit is not bad debt. It depends on the use
A loan to buy the home you live in, with an instalment that fits your budget, replaces rent and builds wealth. A personal loan to pay for last year's holiday is a different conversation.
The right question is never "can I pay the instalment?". It is "can I pay the instalment, keep saving and absorb a surprise?".
The golden rule: your debt-to-income ratio
Add up every loan instalment you pay each month (home, car, cards) and divide by the household's net income. Below 35% you are comfortable. Between 35% and 45% you are at the limit. Above 50% most banks will not even approve.
A couple with €3,000 net and a €980 mortgage instalment sits at 33%. Add a car at €300 a month and it jumps to 43%. This is where many families get squeezed without noticing.
The debt-to-income ratio calculator shows you the percentage and tells you whether you still have room for the loan you are considering.
Three habits that protect anyone with a loan
- An emergency fund of three to six instalments. Not for investing, for sleeping.
- Review your mortgage every two years. Spread, insurance and rate change; your 2021 contract may be expensive in 2026.
- Overpay wisely. With the 0.5% fee back, small overpayments still pay off when the loan rate is higher than what your savings earn.
Frequently asked questions
What counts towards the debt-to-income ratio?
Every loan instalment: mortgage, car, personal, credit cards paid in instalments. Rent, water and electricity do not count, but the bank looks at them in its analysis.
Should I overpay the mortgage or save?
If the loan rate is higher than what you can earn on savings without risk, overpaying earns more. But only after the emergency fund is in place.
Is the €175,000 average what I should borrow?
It is a national average. What you should borrow is what your debt-to-income ratio can carry comfortably, even if the Euribor rises.