Buying conditions for British people in Portugal are set to get friendlier, thanks to the combined effect of a fall in the value of the euro and the arrival in June of conditions for cheaper euro mortgages.
The changes came about after the European Central Bank historically imposed a negative interest rate for banks keeping money on deposit, and at the same time reduced the central re-financing rate to 0.15 per cent from 0.25 per cent, which typically influence mortgage rates set by banks within the Eurozone.
This is the sixth ECB rate cut in the last two-and-a-half years and means the monthly payment of a tracker mortgage on a €300,000 loan by is around €240 a month less compared to in the autumn 2011. Meanwhile, Sterling has hovered around an 18-month high against the euro, adding further impetus to the buying power of Britons in depressed property markets in southern Europe, including Portugal.
Most mortgages in Portugal are variable, so borrowers will feel the immediate effect of the recent rate cut. Rates are typically around the 4 per cent mark for foreign borrowers and loan-to-value available can vary from 50 to 80 per cent.
British buyers considering a home loan in Portugal should remember the exchange rate can go the other, meaning monthly mortgage repayments could go up if the euro strengthens. One way to minimise this exposure is to forward purchase with a fixed exchange rate enough euros to cover repayments for six months or a year, thereby fixing your monthly outgoings in pounds.