BdP forecasts Euribor rising to 2.4% and inflation at 3.1%, which is expected to curb housing investment in the coming years.
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Author: Redaction
Euribor rises and financing becomes more expensive
The Bank of Portugal (BdP) projects a deterioration in financial conditions, with the 3-month Euribor rising to 2.4% this year. This development reflects a more restrictive monetary environment and is expected to have a direct impact on housing investment, increasing mortgage costs and reducing household borrowing capacity.
The upward trend in interest rates is expected to continue in the coming years, in a context where tighter financing conditions are affecting housing investment decisions. The increase in Euribor affects both new contracts and variable-rate mortgages, placing additional pressure on the market.
High inflation and restrictive monetary policy
Inflation is expected to stand at 3.1% this year, gradually declining towards around 2% in the following years, mainly driven by rising energy prices. The impact of the conflict in the Middle East and higher oil prices remain key factors shaping price developments.
At the same time, the European Central Bank has maintained a more restrictive monetary policy, with further interest rate increases to contain inflationary pressures. This strategy contributes to higher financing costs and reinforces the impact on housing investment, limiting demand and slowing new purchasing decisions.
Housing investment loses pace
The BdP estimates that housing investment will grow by only 2.4% on average between 2026 and 2028, below previous forecasts and significantly lower than recent years’ performance. This slowdown is driven by higher mortgage costs and weaker demographic dynamics. Housing investment is also affected by slower growth in household disposable income and more moderate population growth. These factors contribute to reduced pressure in the housing market.
Despite the slowdown, the central bank maintains its forecast of 1.8% economic growth in 2026 and expects a stable GDP trajectory in the following years. The geopolitical context and financial conditions will continue to play a key role in housing investment behaviour.
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