how the installment changes – Corriere.it

Intesa Sanpaolo accepted the invitation of Economy Minister Giancarlo Giorgetti to lengthen the installments of variable mortgages. “I believe it can be done, the problem does not concern the banks but the rules of the ECB which they must respect”, explained the president Gian Maria Gros-Pietro, at the end of the Abi executive who followed the assembly where also the president Antonio Patuelli has expressed availability. «In Abi the climate is favourable. We do everything that can be done for the country, the customers and the government». And to do so, according to the president, “there is no need” for a specific protocol between the government and credit institutions.

Abi: “Ready to extend variable rate installments”

Intesa Sanpaolo’s decision is in line with the opening of the Abi: the durations of variable rate mortgages can be lengthened to alleviate the difficulties of families and businesses in paying the monthly installments, given the increase in interest rates by of the ECB. An availability that thus takes up the solicitation launched in recent weeks also by the government and reiterated by the Minister of Economy Giancarlo Giorgetti, who during the ABI meeting recalled how last February the Bank of Italy “invited all banks to carefully evaluate the opportunity to review the contractual changes to the detriment of customers that they had previously implemented», considering the increase in rates launched last July by the ECB.

Giorgetti: «Italian banks in better conditions than in the past»

The owner of the MEF today assessed the ECB’s action as “understandable”, but at the same time he acknowledged that the concern about the recessionary effects on an EU economy still under stress due to the pandemic and the Russian conflict is “equally understandable”. Ukrainian”. For Giorgetti, then, “despite the many shocks that have occurred in the last three years, Italian banks are in a much better condition than that observed during past episodes of crisis”. And this obviously can only help the decision to extend the mortgages. The Italian situation was also photographed during the same meeting by the president of the ABI, who recalled how Italian banks «maintain almost two thirds of their mortgages at fixed rates, with ever increasing funding numbers, upon request, they can extend the duration of mortgages for those who are up to date with payments or make subrogations”. According to Patuelli, “banks in Italy have never applied negative rates on deposits and are increasingly remunerating savers with market conditions that are competitive even with those offered by European countries”.

The pros and cons of extending the installment

But is extending the mortgage payment worth it? Gino Pagliuca tried to answer this question in Corriere: there are pros and cons. Among the pros is the lower monthly amount, also in consideration of inflation which ends up eroding real spending. According to Pagliuca, there are two cons: the total nominal expenditure rises a lot and the debt is reduced less. In practice, if we assume a 150,000 euro 20-year mortgage at 4% and a 30-year mortgage at 3.8%, the 20-year mortgage costs 909 euros per month, the 30-year mortgage 699; the total expenditure for the twenty-year anniversary is 218,153 euros, for the thirty-year anniversary it rises to 251,617, with an increase in expenditure of almost 33,500 euros. If you want to pay off after five years, the twenty-year has a residual debt of 122,886 euros, the thirty-year of 135,228. In the event of repayment after 10 years, on the other hand, the 20-year loan has a residual debt of 88,779 euros, the 30-year loan of 117,371. In short, in the end you have to pay out almost 28,600 euros more.

Three examples

Pagliuca also tried to give three examples. The first concerns a 200,000 euro 25-year loan that started at 1.61% 10 years ago with an installment of 810 euro. With the 4% Euribor, the new monthly outlay would rise to 1,192 euros. The same mortgage, however, which began in 2018 at a rate of 1.07% (remember that the Euribor had a negative value for almost 5 years) had an initial installment of 760 euros which today could reach 1,284. Finally, the third example, the worst: a loan again of 200 thousand euros but thirty years old and started only two years ago, at a rate of 0.97%. The first installment was 705 euros, the risk is of having to pay 1,401, practically double.