In 2025, Euribor rates have shown a downward trend, especially in the three- and six-month terms, which have reached lows not seen since 2022. This evolution has a direct impact on mortgage repayments with variable rates, which are indexed to these rates. For thousands of Portuguese families, this reduction represents significant financial relief, allowing for greater flexibility in the monthly budget and opportunities for early repayments or savings.
What is the Euribor?
Euribor (Euro Interbank Offered Rate) is the average interest rate at which a group of 19 eurozone banks are willing to lend money to each other on the interbank market. This rate serves as a key reference for several financial products, including the majority of variable rate mortgage contracts in Portugal. There are several Euribor rates depending on the lending term between banks, the most common being 1, 3, 6, and 12 months.
Euribor is calculated daily by the European Money Markets Institute (EMMI), which collects the rates reported by the banks, excludes the outliers, and publishes the average of the remaining values. For repayment updates, banks typically use the monthly average of the Euribor for the agreed term, ensuring that the applied rate reflects real market conditions.
Impact of Euribor Rates on Mortgage Credit
The monthly repayment of a variable rate mortgage is calculated by adding the bank-defined spread to the Euribor rate of the selected term. Therefore, when Euribor rates rise, repayments increase; when they fall, repayments decrease.
In Portugal, since January 2024, the six-month Euribor has become the most used index, representing around 37.61% of all variable rate loans, followed by the 12-month rate (32.46%) and the three-month rate (25.60%). In June and July 2025, the three-month Euribor fell to around 1.937%, while the six-month rate settled at approximately 2.031%, both the lowest levels since late 2022. The 12-month Euribor, meanwhile, recorded a slight increase to around 2.062%.
These variations mean that families with contracts indexed to shorter terms are benefiting from lower repayments, while those with contracts reviewed annually may feel the effects of the rise in the 12-month Euribor.
What Can and Should Mortgage Holders Do?
Given the current Euribor rate scenario, there are several strategies mortgage holders can adopt to optimise their budget:
- Regularly monitor the evolution of Euribor and the credit review dates to anticipate changes in repayment amounts.
- Use financial simulators to understand the impact of Euribor changes on the household budget and plan ahead.
- Consider making early capital repayments, taking advantage of lower instalments to reduce the outstanding balance and, consequently, future interest.
- Contact the bank to renegotiate credit conditions, such as changing the spread or switching from a variable to a fixed rate, especially if future rate increases are expected.
- Maintain a financial reserve to cope with potential rate hikes, ensuring stability in the household budget.
The Influence of ECB Decisions on Euribor Rates
Euribor rates are heavily influenced by the monetary policy decisions of the European Central Bank (ECB). In June 2025, the ECB cut its key interest rate to 2%, marking the eighth consecutive reduction since June 2024, contributing to the drop in three- and six-month Euribor rates.
The next ECB monetary policy meeting is scheduled for 23 and 24 July 2025 in Frankfurt. Markets anticipate this may be the last interest rate cut of the year, possibly signalling a stabilisation or even a future increase in Euribor rates.
The ECB’s decisions directly affect the cost of money in the eurozone, influencing banking market liquidity and inflation expectations, which in turn determine Euribor trends. Therefore, following ECB decisions is crucial for those who have or intend to take out a mortgage, as they directly impact repayment amounts and medium- to long-term financial planning.
Conclusion
Euribor rates in 2025 show a downward trend in shorter terms, benefiting holders of variable rate mortgages. However, the slight rise in the 12-month Euribor and the potential stabilisation of rates after July indicate that this cycle of cuts may be nearing its end. For this reason, it is essential that Portuguese families stay informed, monitor rate developments, and make informed financial decisions to ensure the sustainability of their mortgage.
Staying up to date with ECB meetings and decisions, simulating future scenarios, and considering renegotiation or early repayment are key steps to effectively manage the impact of Euribor rates on the family budget.
中文(简体)
Português
English
Français
Español
Deutsch
Nederlands
Русский
