Will the increase of fifty cents in the ECB rate have consequences on the mortgage rate? Until the outbreak of the banking crises in the US and Switzerland, we would have written this sentence with a full stop and not with a question mark, but last Thursday when it was clear that Christine Lagarde would hold firm on the decision to increase the ECB rate by another 50 cents, the Euribor, the variable loan indexation parameter fell by 17 basis points, contrary to expectations, bringing the drop to about 30 cents from the previous week. It could be, but now more than ever the conditional is a must, the signal that it is believed that the season of increases has come to an end, but if this is really the case we will know in the coming weeks.
Looking at the conditions practiced on the market, a phenomenon that has been occurring since the beginning of the year is confirmed: the costs of fixed and variable costs are practically the same. The average of the five cheapest mortgages on the portal mutuiOnline.it highlights that the installment (calculated on effective rates) on a 20-year mortgage of 140,000 euros it is 830.40 euros for the fixed and 829.80 euros for the variable.
The acceleration of the variable
In the thirty-year mutuiOnline.it, the installment of a standard 25-year mortgage of 140 thousand euros out of 200 thousand moved to a fixed rate from 568 to 707 euros, that of the variable from 522 to 702.The data on variables obviously refers to the initial installment, because the increase is much heavier on current mortgages. To limit myself to just one example, a 25-year mortgage of 140,000 euros that started in May 2021 at 0.87% paid 519 euros as an initial installment; the May installment, under the current conditions of the Euribor, would be 902 euros and if the Euribor, after the first reaction, fully incorporated the increase of 50 cents, the installment would rise to 956 euros, with an increase of 435 euros (or , if you prefer, of 84%) compared to the starting cost.
The substitute alternative
The reaction of those who are now looking for a mortgage on the market is the most predictable: according to the broker’s Observatory mutuisupermarket.it the subrogation applications in the online channel conquered as much as 44%, the fixed rate represents 96% of the application and the age group most interested in obtaining a loan (but also the one that obviously has the highest refusal rate in the preliminary investigation) is that of the under 36s, who represent 40% of the potential market. The problem is that subrogations and fixed mortgages are requested, but it is not certain that they will be obtained because the banks are well aware that in the event of a return to lower rates, those mortgages would be subject to subrogation.The slowdown in mortgage applications and disbursements has evident repercussions on the real estate market, as shown by the slowdown in transactions, slight in the last part of 2022, as evidenced by the official data of the Revenue Agency, more decisive since the beginning of the year, according to the declarations of real estate agencies. “There are also emotional implications linked to the perception we have of the context – says David Scala, mortgage manager of Intesa Sanpaolo -. If we go back not even much, it is easy to verify that the rates applied today, especially at fixed rates, are those that were the physiology of the market before».
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Who is out of mortgages?
In fact though the cost of mortgages runs the risk of cutting off the younger generation from buying a house, also because the rate limits presented by the de facto legislation make subsidized mortgages from the Consap fund little or not feasible, which allow under 36s to buy a house using up to 100% financing. «Young people – continues our interlocutor – must be offered a sustainable installment and in any case lower than a rent. With Domus Giovani we have implemented a series of tools to achieve this result».
Which? «For example, 40-year mortgages, which today allow you to have 130 thousand euros with Ltv 80 at 508 euros a month, or the possibility of paying pre-amortisation for a period of up to 10 years with interest-only installments in order to be able to manage with serenity the many expenses faced by a young man who buys a house. Or again the possibility of accessing a mortgage also for young people with atypical work ». The mortgage market is also slowing down because until last year those who had all the cash often preferred to go into debt anyway given the minimum rates. “True – concludes Scala – but the trend in interest rates on the markets can also induce some customers to buy a property by taking out a mortgage and, at the same time, using the liquidity available in investments with returns absolutely in line with current mortgage rates, thus optimizing its financial management.
