Uncertainty continues to hover over the evolution of mortgage interest rates. This is because the Euribor reduction was halted in the last two months, after the European Central Bank (ECB) decided to keep its benchmark rates unchanged. But how will this evolve in the future? The Public Finance Council predicts that the 3-month Euribor will fall to 1.9% in 2026, returning to highs only after 2028.
The Public Finance Council’s projections, released last week, reveal that the 3-month Euribor is expected to end 2025 at 2.2%, followed by a two-year period during which it will be lower, at 1.9%. If so, it means that families with mortgage loans indexed to the 3-month Euribor should see relief on their mortgage payments between 2026 and 2027.
Behind these forecasts are the European regulator’s decisions: “With the inflation rate reaching levels in line with the monetary policy objective, the ECB chose to keep its benchmark interest rates unchanged in July and September. After a cycle of eight consecutive 25-basis-point reductions, which began in June 2024, the deposit facility interest rate was cut in half by June of this year (from 4.0% to 2.0%). (…) The transmission of the reduction cycle is visible in the evolution of the 3-month Euribor”.
Only in 2028 is the average 3-month Euribor, which “is based on the expectations implicit in futures contracts,” expected to rise to 2.1%. And in 2029, it should rise again to 2.3%, the document further predicts. These increases should be reflected in higher mortgage payments, which are updated quarterly.
“In line with the futures market, the 3-month Euribor rate was updated to a lower value by approximately 25 basis points over the projection horizon, reflecting a more accommodative monetary policy in the second half of 2025,” the Public Finance Council further explains.
It should be noted that the 3-month Euribor represents approximately a quarter of variable-rate homeownership and permanent mortgage loans in our country, according to data from the Bank of Portugal. The most representative rate is the 6-month Euribor (with 38% of the total), followed by the 12-month Euribor (with 32% of contracts).