Dear mortgages, agreement reached between Mef and Abi: lengthening of the duration and transition from variable to fixed to lighten installments

Possibility of lengthening the duration of the mortgages in order to lighten the burden of the installment, expansion of the range of variable-rate mortgages that can switch to the less risky and even a little less onerous fixed rate, all by publicizing as much as possible the possibility, for those in economic difficulty, to suspend payment of the installments completely for 18 months, activating the “Gasparrini” Fund. Option valid for those with a mortgage of up to 250 thousand euros.

The agreement reached between the Ministry of the Economy and Abi, the association of banks, is an agreement in three steps, which has done so by transforming it into a circular that will now be sent to the members. Which will in any case remain free to join the initiative or not and decide both how much to allow the lengthening of the duration and the enlargement of the area of ​​those who can benefit from the transition to the fixed rate. Option now allowed to those with an Isee income not exceeding 35 thousand euros and a mortgage not exceeding 200 million. Parameters that could be raised to 45,000 and 400,000 euros respectively. However, everything is based on a moral suasion that both the Mef and Abi herself say they are convinced can work. Also because more than this black and white could not be put without running the risk of running into a call from the Anti-trust.

However, this is an agreement that impacts on a good 425 billion euros disbursed in the form of mortgages to Italian families, of which 67% at a fixed rate and 37% at a variable rate.

“The ABI – it is written in the text that the same association is about to disseminate among the banks – recommends that at the first signs of possible difficulties, the mortgage holder should contact his bank to evaluate possible solutions to deal with the increase in interest rates”.

Solutions that consist in the possibility of “agreeing with one’s bank on extending the duration of one’s loan or requesting a revision of other contractual conditions”. Those who have chosen a variable rate mortgage in Italy have a further series of possibilities for modifying the contractual conditions of their mortgage, among these: the “subrogation” or “portability of mortgages” which allows – without costs – to change the lending bank and modify the characteristics of the original loan in terms, for example, of duration, the type of interest rate or level of the latter. Then the renegotiation of mortgage loan contracts introduced by article 1, paragraph 322, of Law 29 December 2022, n. 197 (Budget Law 2023), for which the borrower has the right to obtain, under certain conditions, the transformation of the mortgage from a variable rate to a fixed rate».

The ABI then recalls that “there is the possibility of suspending the payment of mortgage installments for families in difficulty through the activation by the banks of the Solidarity Fund for mortgages”.

However, all this must take place in compliance with the guidelines set by the EBA, the European Banking Association: i.e. that no payment has been made beyond 90 consecutive days and that the renegotiation of the loan does not cost the bank more than 1% of the value of the loan itself. This means that if an extension of the loan term is opted for, there will be no charges for the borrower for the administrative procedures necessary for the exchange, but the latter will still end up paying a greater amount in terms of interest to prevent the bank, losing more than the fateful 1%, from having to declare the borrower insolvent. With all that follows in terms of the impossibility of accessing new credit lines in the future.

However, there is no doubt that by lengthening the repayment times, the installment becomes lighter. Just to understand, with a 25-year mortgage of 200 thousand euros signed in 2018, moving to a 29-year term, the installment would be reduced from 1,298 to 980 euros.

Among the other possibilities of requesting a revision of the contractual conditions, the individual banks could also choose to have only the interest on the debt repaid for a certain number of years, then regularly resuming the repayment of the principal, which the banks would set aside precisely so as not to then be forced to declare the borrowers in default. Assuming a twenty-year mortgage signed in 2013 with an interest rate of 5%, the interest-only installment for a period of, say, 4 years would drop from 984 to 374 euros. But once the truce has expired, i.e. when the capital is repaid again, the installment becomes even heavier than before, because the amortization part of the loan would be spread over fewer years. So a useful move in desperate cases but not very convenient.