Starting tomorrow, August 1, Portuguese banks assessing new mortgage applications have to work within a revised set of limits from Banco de Portugal, the central bank. The new recommendation formally replaces one dating to 2018, lowers the maximum share of a household's income that can go toward loan payments, and closes a financing exception on properties banks already own. It also loosens loan term limits for younger buyers specifically, so this isn't a straightforward tightening story.

This is a Banco de Portugal recommendation, not a law. It works on a "comply or explain" basis, banks aren't legally required to follow it, though the central bank has said it wants to eventually make these rules binding, a step the International Monetary Fund has also recommended.

The core change: less room on affordability

The maximum debt-to-income ratio, known in Portugal as the taxa de esforço, essentially the share of your monthly income that goes toward paying off debt, drops from 50% to 45%. It's the main number a bank checks when deciding whether your income can support a mortgage payment alongside your other debts.

Banks also have less room to approve loans above that limit as exceptions. Previously they could do so for up to 15% of the credit they issued each half-year. That falls to 10% starting tomorrow, and banks will need to justify each exception rather than treating it as routine.

Why Banco de Portugal is acting now

Housing credit grew 10.6% in the year to March 2026, more than triple the eurozone average, and accelerated further to 10.9% by June, the fastest annual pace since February 2003.

Banco de Portugal has pointed specifically to the state's mortgage guarantee scheme for buyers under 35 as a driver of rising risk in bank portfolios. According to the central bank's own March 2026 monitoring report on the 2018 recommendation, the share of new mortgages going to higher-risk borrowers jumped from 3% in 2024 to 21% in 2025, a shift the report attributes largely to loans made under that guarantee. The report also found that new lending exceeding the previous recommendation's 90% loan-to-value limit was concentrated almost entirely in loans backed by the state guarantee, non-guaranteed lending stayed compliant. Loans with a loan-to-value ratio above 90% overall went from a negligible 0.1% of new lending in 2024 to 19% in 2025, and borrowers aged 18 to 35 accounted for 58% of new primary-residence mortgages in 2025, up from 47% the year before.

Banco de Portugal also consulted the banking, leasing, and consumer-protection industry associations, along with the European Central Bank and the European Systemic Risk Board, before issuing the revised recommendation.

Loan terms actually get longer for younger buyers

Alongside the tightening, Banco de Portugal is dropping the recommendation that banks manage their overall mortgage portfolio toward an average 30-year term. In its place are two flat caps based on the borrower's age: up to 40 years for borrowers 35 or younger, and up to 35 years for those older. For younger buyers specifically, that's a longer maximum term than previously allowed. A longer repayment period reduces monthly payments, partially offsetting the tighter affordability limit.

The 100% financing exception closes

Until now, buyers purchasing a property already owned by a bank, typically repossessed stock, could get financing up to 100% of the property's value, an exception to the general loan-to-value limits. That exception disappears tomorrow. Those purchases will now follow the same caps as any other home purchase: up to 90% loan-to-value for a primary residence, up to 80% for other purposes. Banco de Portugal's stated reason for dropping the exception is that banks are currently carrying low levels of non-performing assets on their balance sheets, meaning the original case for easier financing terms to help move repossessed properties off bank books no longer applies as strongly as it did when the exception was introduced.

Separately, real estate financial leasing (locação financeira imobiliária) is being removed from the recommendation's scope entirely. Banco de Portugal describes it as a small, structurally different segment of the market, official figures put it at 375 contracts outstanding at the end of 2025, worth about €31.6 million. Leasing for movable goods, cars for example, stays within the recommendation.

What stays the same

The general loan-to-value limits themselves aren't changing, 90% for a primary residence, 80% for other purposes, only which transactions they apply to. Maximum terms for consumer credit are also unchanged: seven years for personal loans, ten years for auto loans and loans for education, health, or energy efficiency. And loans still have to include regular repayment of both principal and interest; the rules don't allow for payment holidays outside of default situations.

What it means if you're applying for a mortgage

If your bank assesses your solvency before August 1, you're evaluated under the current rules, 50% affordability limit included, regardless of when the loan actually closes. If that assessment happens on or after August 1, the new limits apply. For most applicants the practical effect is expected to be modest, one industry estimate puts the share of 2025 mortgages that already fell within the new 45% limit at roughly three in four, but anyone whose finances sit close to the old ceiling, or who's carrying other debt, may qualify for a smaller mortgage than they would have under the previous rules.