Banco de Portugal lowers the affordability limit for new loans to 45%. What changes if you are applying for a mortgage

On 2 July 2026, Banco de Portugal, the country's central bank and regulator, issued a new macroprudential recommendation for new mortgages and consumer loans. It replaces the 2018 recommendation and keeps the same principles and goals. It applies to applications assessed by lenders from 1 August 2026. This article explains, in plain English, what has changed and what it means if you are applying for a mortgage.

What is a macroprudential recommendation?

It is a set of rules that Banco de Portugal gives lenders about the loans they grant. It sets limits on the criteria lenders use when they assess whether you can afford a new loan. The aim is prudent lending: households should not take on debt they cannot repay, and the financial system should be able to withstand harder times.

Why change the rules now?

Banco de Portugal points to several reasons. House prices are rising faster. Households are borrowing more, for homes and for consumption, and the average loan is larger, which means more debt per household. More first-time buyers are young, and typically on lower incomes, and more purchases rely on credit. Competition between lenders remains strong.

The main change: the affordability limit falls from 50% to 45%

The limit is set on your debt service-to-income ratio, or DSTI: the share of your monthly income that goes to loan repayments. It counts every repayment, not just the new mortgage. A car loan or a personal loan counts too.

Until July, the recommended ceiling was 50%. Since 1 August it is 45%. Banco de Portugal wants to slow the growth in household debt and make lenders more prudent about what each borrower can afford.

One detail matters. The lender does not use today's repayment. It calculates the repayment on the new loan as if interest rates were to rise, and it also applies a prudence adjustment to your income. So the ratio the lender calculates can be higher than simply dividing today's repayment by your salary.

A worked example

Take a household with a monthly income of 2,000 euros. Under the 50% limit, total loan repayments could reach 1,000 euros a month. Under the 45% limit, the ceiling is 900 euros. If 200 euros already go to a car loan, 700 euros are left for the mortgage repayment, calculated with the rate increase the lender simulates.

Can lenders go above 45%?

They can, within a limit. Each half-year, up to 10% of the total credit a lender grants may have a ratio above 45%. It is room for cases the lender considers justified. It is not a right you can claim. The decision always rests with the lender.

How long can the mortgage run?

The term rules are simpler now. There are only two limits, based on the borrower's age:

• up to 35 years old: maximum term of 40 years;
• over 35: maximum term of 35 years.

The recommendation on the average term of each lender's loan book has been dropped.

Two more changes, with less impact for most people

Homes owned by the bank. Until now, if you bought a property that belonged to the lender itself, you could borrow up to 100% of its value. That special limit is gone. The general loan-to-value (LTV) rules now apply: the ratio between the loan and the value of the home. Banco de Portugal's reasoning is that lenders now hold few non-performing assets on their balance sheets, and these properties are among them.

Property leasing. Leasing of real estate is no longer covered by the recommendation, because it differs from a conventional mortgage and has little weight in the Portuguese market. Leasing of movable assets, cars for example, remains covered.

When do the new rules apply?

They apply to loans whose affordability assessment takes place on or after 1 August 2026. What counts is the date the lender assesses your ability to repay. Banco de Portugal left this gap between the announcement, on 2 July, and the start date so that lenders could prepare.

Before deciding, Banco de Portugal consulted the Portuguese Banking Association (APB), the leasing, renting and factoring association (ALF), the specialised credit association (ASFAC) and the consumer association DECO, as well as the National Council of Financial Supervisors, the European Central Bank and the European Systemic Risk Board. It will monitor compliance and may take further measures if it sees the need.

What it means if you are applying

For the same repayment, you need a slightly higher income. For the same income, the maximum repayment a lender will accept is slightly lower. In practice, some households will need to borrow less, put down a larger deposit, extend the term within the limits, or add a joint borrower. If you already have other loans, you will feel the change more, because every repayment counts towards the 45%.

Sources

Banco de Portugal, press release «Banco de Portugal revê a Recomendação Macroprudencial aplicável aos novos contratos de crédito a consumidores» (in Portuguese), 2 July 2026.