Portuguese rethink spending as living costs rise

Higher mortgage repayments and rising living costs are prompting many Portuguese households to cut back on spending. Among the first expenses likely to be cut are restaurant meals, new clothes and holidays, particularly trips abroad.

According to a survey by Intercampus for Negócios, Correio da Manhã, CMTV and NOW, 56.8% of mortgage holders said they were already reducing, or planned to reduce, spending on items other than their mortgage payments.

Meanwhile, 28% said they were not planning to cut back, while 15.3% either did not know or declined to answer.

Among those intending to reduce spending, dining out topped the list, with 82.1% saying they would eat at restaurants less often. This was followed by clothing and accessories (73.9%), holidays and other non-essential travel (67.9%), and cultural activities or products (61.9%).

Respondents also indicated they would cut spending on holidays (45.5%), driving (33.6%) and even food shopping (21.6%).

Mortgage interest rates rose in March for the first time since January 2024, reaching 3.09%, pushing the average monthly mortgage repayment to €402 – the highest level since December 2024.

Although the implied mortgage interest rate eased slightly over the following two months, settling at 3.065% in May, the combined impact of higher borrowing costs and inflation continues to squeeze household finances. Inflation rose to 3.3% in May compared with a year earlier, largely driven by higher energy prices, adding further pressure to the cost of living.

Despite these financial pressures, relatively few homeowners have renegotiated their mortgage terms. Just 23% of respondents said they had restructured their home loans with their banks, equivalent to around 9% of Portuguese households overall, according to the survey’s calculations.

Source: Essential Business

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