Portugal Interest Subsidy: Help for High Euribor

Note: This content is specific to the Portuguese mortgage market. With most mortgages in Portugal linked to the Euribor, many families have seen their monthly payments double. To prevent defaults, the government introduced the Bonificação de Juros (Interest Subsidy).

How it works

If your interest rate exceeds 3%, the State pays a portion of the interest above that threshold directly to the bank.

Subsidy Amount: 50% or 75% of the additional interest caused by the rate hike.

Cap: Up to €800 per year.

Eligibility

To qualify for the Interest Subsidy, you must meet the following criteria: 1. Loan: Permanent residence mortgage contracted before 2023. 2. Income: Annual household income up to the 6th IRS bracket (approx. €39k). 3. Effort Rate: The mortgage payment must consume more than 35% of your net monthly income. If you meet these criteria, contact your bank immediately to apply. 👉 [Calculate your Effort Rate (Taxa de Esforço)](/en/simulador-credito-habitacao)

What is the Euribor and how does it affect my mortgage?

The Euribor (Euro Interbank Offered Rate) is a benchmark interest rate that determines the cost of borrowing for banks and other financial institutions. In Portugal, most mortgages are linked to the Euribor, which means that when the Euribor rises, your mortgage interest rate also increases. This can lead to higher monthly payments, making it difficult for households to afford their mortgages.

How much can I expect to receive from the Interest Subsidy?

The amount of the subsidy depends on the interest rate of your mortgage and the amount of interest you pay above the 3% threshold. For example, if your mortgage interest rate is 4% and you pay €1,000 in interest per year, the State will pay 50% or 75% of the additional €100 (€1,000 - €900, which is 3% of the loan amount) in interest, up to a maximum of €800 per year.

What are the benefits of the Interest Subsidy?

The Interest Subsidy provides several benefits to eligible households, including:

Reduced mortgage payments: By paying a portion of the interest, the State helps reduce the monthly mortgage payments, making it easier for households to afford their mortgages.

Prevention of defaults: The subsidy helps prevent defaults by reducing the financial burden on households, which can lead to a decrease in mortgage arrears and defaults.

Support for low-income households: The subsidy is targeted at low-income households, which are often the most affected by interest rate hikes.

How do I apply for the Interest Subsidy?

To apply for the Interest Subsidy, you need to contact your bank and provide the necessary documentation, including:

Proof of income: You need to provide proof of your annual household income, which must be up to the 6th IRS bracket (approx. €39k).

Mortgage contract: You need to provide a copy of your mortgage contract, which must have been contracted before 2023.

Effort Rate calculation: You need to calculate your Effort Rate, which must be more than 35% of your net monthly income.

Your bank will then assess your eligibility and apply for the subsidy on your behalf.

What are the key takeaways from the Interest Subsidy?

The key takeaways from the Interest Subsidy are:

The subsidy is available to eligible households with permanent residence mortgages contracted before 2023.

The subsidy pays 50% or 75% of the additional interest caused by the rate hike, up to a maximum of €800 per year.

The subsidy is targeted at low-income households with annual incomes up to the 6th IRS bracket (approx. €39k).

The Effort Rate must be more than 35% of the net monthly income.

Households can apply for the subsidy through their bank.

How does the Interest Subsidy impact the Portuguese economy?

The Interest Subsidy has a positive impact on the Portuguese economy, as it:

Helps prevent defaults and reduces mortgage arrears, which can lead to a decrease in the number of repossessions and a more stable housing market.

Supports low-income households, which can lead to an increase in consumer spending and a boost to the economy.

Helps to maintain economic stability, as it reduces the risk of a housing market crash and the subsequent economic downturn.

What are the potential drawbacks of the Interest Subsidy?

The potential drawbacks of the Interest Subsidy are:

The subsidy may not be enough to cover the full amount of the interest rate hike, leaving households still struggling to afford their mortgages.

The subsidy may create a dependency on government support, rather than encouraging households to seek alternative solutions, such as refinancing or switching to a fixed-rate mortgage.

The subsidy may not be targeted effectively, with some households that do not need the support receiving it, while others that do need it may not be eligible.

Conclusion

The Interest Subsidy is a welcome support for households in Portugal struggling to afford their mortgages due to high Euribor rates. By providing a subsidy to eligible households, the government can help reduce the financial burden and prevent defaults. However, it is essential to carefully consider the eligibility criteria and the potential drawbacks of the subsidy to ensure that it is effective in supporting those who need it most.