The installments of new mortgages in Italy, the main access route to housing in that country, will skyrocket this year as a result of the rise in interest rates by the European Central Bank (ECB), according to estimates from the real estate market.
For fixed-rate mortgages, values will double as rates average from around 1.8% to more than 5%.
As an example, the monthly payment will amount to 1,304 euros in the case of a 25-year mortgage of 200,000 euros, according to calculations by the Autonomous Federation of Italian Bankers (FABI), the activity’s union, cited by the Italian news agency ANSA. . Meanwhile, for a loan of 100,000 euros, at 25 years and with a rate of 5.3%, the monthly fee will reach 609 euros.
In the case of pre-existing mortgages, those who had a fixed rate will not have any change until the end of the amortization schedule. On the other hand, those who chose installments at a variable rate have suffered increases so far of between 70% and 75%. This means that those who used to pay a fee of 500 euros per month now pay 875 euros.
The report warned that it is “very likely, in light of the ECB’s decision, that payments on old variable-rate mortgages could rise again.” In fact, new mortgages with variable payments could soon reach an average rate of 6% per year, compared to 0.6% that averaged at the end of 2021.
In this way, for a loan of 150,000 euros with a term of 20 years, the monthly installment will be 1,090 euros, about 325 euros more (+63.9%) than what would have been obtained a year ago.
Italian consumers are not only facing a loss of purchasing power due to the high inflation of the last two years, but also the consequences of the ECB’s “remedy” against rising prices: raising interest rates. The refinancing rate was at levels close to zero since 2014, but given the high inflation, the ECB decided to face a round of rate hikes last July that made it rise to unprecedented levels since 2001.
Thus, after eight upward adjustments, the rate currently stands at 4%; and economists anticipate that there will probably be two increases of more than 25 percentage points in July and next September, which will fully affect mortgage rates. Meanwhile, the credit facility rate, at which the ECB lends overnight, stands at 4.25%, and the deposit facility rate, at which banks remunerate excess reserves overnight, at 3.5%.
In Italy, mortgage credit is widespread: of 25.7 million families, 3.5 million have a mortgage, out of a total of 6.8 million who are indebted with other types of financing, such as consumer credit and personal loans.
The total value of mortgages for the purchase of homes amounted to 425,000 million euros at the end of last March, an increase of 13.4% (50,000 million euros more) compared to the end of 2017.
Source: Ambito
