interest doubled for the fixed rate, +60% for the variable rate – Corriere.it

Interest doubled for fixed rate mortgages and increases of more than 60% for the variable. This means that those who used to pay an installment of around 500 euros a month with the variable rate, today pay 825 euros or 325 euros more. Figures which, in the light of the new rate increase decided by the ECB on Thursday 4 May, could rise further. The effects of the increase in the cost of money on mortgages are analyzed in the «Dossier mortgages and consumer credit», created by the Autonomous Italian Banking Federation (Fabi). «The umpteenth increase in the cost of money by the European Central Bank represents another very heavy boulder on bank loans and on the entire Italian economy», declared the general secretary of Fabi, Lando Maria Sileoni. «There are two risks: a very strong slowdown in the real estate and construction markets and a very evident reduction in business investment, which will curb employment. Like a film already seen, the decision of the American Federal Reserve was followed by the photocopied decision of the European Central Bank».

There are 3.5 million families with a mortgage

The analysis provides an overview of the effects of the latest increase in interest rates decided by the ECB on loans to households. Those in debt in Italy are 6.8 million, equal to about 25% of the total: of these, 3 and a half million have a mortgage for the purchase of a house. The new rate hike of a quarter of a percentage point decided by the European Central Bank, which brought the base rate to 3.75%, weighed precisely on household loans. “As regards new mortgages – writes Fabi – the installments of those at fixed rates are destined to double, while for those at variable rates the monthly repayment should rise by 50-60%”.

New fixed rate mortgages

For a fixed rate mortgage of 200,000 euros over 25 years, the average rate applied by banks could exceed 5%, the monthly installment will therefore be 1,218 euros. While for a loan of 100,000 euros, also for 25 years, with an interest rate of 5.1%, the monthly payment will be 597 euros. As for old mortgages, on the other hand, there is no difference for those with fixed rates, while the installments of those with variable rates have undergone increases of up to 65%.

How does the floating rate change?

The total value of mortgages for the purchase of homes amounted, at the end of February 2023, to 426 billion euros, up by 50 billion compared to the end of 2017 (+13.5%), explains the dossier. The installments of old variable-rate mortgages have grown by an average of 65%. New variable-rate mortgages could soon reach an average of 6% from 0.6% at the end of 2021. For a 150,000-euro loan with a duration of 20 years, the monthly installment will therefore be 1,090 euros, i.e. say 325 euros more (+63.9%) than what would have been obtained a year ago or 665 euros.