Check the mortgage payments: why a “storm” arrives

An extremely special year that had a strong impact on the installments of mortgages of Italian families.

If at the beginning of 2020 Istat spoke of a “storm” with a record jump in house prices with a + 1.9%, since the beginning of the pandemic – with the consequent and disastrous effects on the economy and on consumer portfolios – the rates on new bank mortgages had undergone a decline which has pruned theHelp (Italian Banking Association) to declare, in the February 2021 report, that interest rates on financing transactions “remain at particularly low levels, at historic lows”. Furthermore, the average rate on new business is around 1.30% against 5.72% at the end of 2007.

In short, the cost of the mortgage installment between 2020 and the first two months of the current year has dropped, giving the owners of the purchased properties a little respite; yet, starting from March, the signals arriving, especially from overseas, are those of a recovery in the sector which means, in fact, – through the rise in interest rates on the bond markets and the rise in inflation – that mortgages could start to rise again.

Nonetheless, last year mortgage applications fell by almost 20%, but the 500,000 applications made show that the real estate market remains an extremely strong and lively market and that, in 2021, it should start growing again.

What could happen

As written in a previous article de IlGiornale.It, according to experts, the increase could reach a quarter of a point by the end of 2021; with regard to variable mortgages, however, there should be no increases on the horizon with the Euribor index remaining around -0.56% and with average rates ranging from 0.62% for 10-year loans to 0 , 80% for those at 30.

Calculator in hand, the impact on the monthly payment should be very limited; giving an example, on a loan of 100 thousand euros to be paid off in 30 years of installments, the expected increase should not exceed 10 euros. There is a not insignificant peculiarity; analyzing the Euribor indices if this reflected the trend of the parameters, this would imply that fixed mortgages should cost about 90 cents and one percentage point more than variable rate mortgages.

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Yet this is not happening, probably because banking institutions continue to cut their spread in such a way as to favor customers towards the fixed rate that, in recent years, have dominated the market so much so that the variable rate now represents only between 5 and 10% of the market.

Loans are falling

While on the one hand there is an increase in fixed mortgage rates, loans are falling. In February, the average rate on the total fell from 2.26 in January to 2.24%. According to the data in the ABI report, loans to households and non-financial companies amounted to approximately € 1,310 billion, an increase of 5.1% on a trend basis, and an increase of 0.2 compared to January.

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