Portuguese Household Debt Rises, Central Bank Warns

The governor of Banco de Portugal, Álvaro Santos Pereira, has issued a warning about the rising level of household debt in Portugal, primarily driven by housing credit. This development is significant as it marks a reversal of the previous trend of debt reduction, which had been a notable achievement in the Portuguese economy over the past decade.

In 2025, household debt as a percentage of GDP increased from 54.9% in 2024 to 56.1%, according to Santos Pereira. This rise is attributed to the surge in housing credit, fueled by increasing property prices. The governor highlighted that this trend contrasts with the public and corporate sectors, which have continued to reduce their debt levels.

The warning comes as the Portuguese government injects an additional €750 million into a public guarantee scheme to help young people purchase homes with full financing, raising the total to €2.3 billion. This move, while facilitating access to housing, also raises concerns about increased credit risk in the market.

Santos Pereira emphasized the importance of reducing household debt to mitigate exposure to potential economic shocks and to provide more room for investment and consumption. His cautionary message was shared on social media, underscoring the need for balanced economic policies.

Originally published at Eco.pt