Rates, the ECB tightening will make mortgages fly: we are heading towards a 237-euro sting

On May 4, the ECB should announce a new rise in the cost of money; this time the increase could be only 25 basis points which, for those with an average variable rate mortgage – according to the simulations of Facile.it – ​​could still translate into an increase in the installment of as much as 237 euros (+52%) compared to the beginning of last year. To understand how installments have grown and how they could rise further following a new rate hike by the ECB, the comparator examined a variable-rate loan of 126,000 euros over 25 years signed in January 2022. The rate ( The starting TAN) used in the analysis is equal to 0.67%, corresponding to a monthly installment of 456 euros. Following the various increases in the cost of money implemented by the European Central Bank to combat inflation, the rate on the variable standard mortgage rose considerably, exceeding 4.10% in April 2023. With the further ECB increase of 0.25%, the monthly installment of the loan under analysis could even reach 693 euros, 52% more than the initial one. “If it is true that the Euribor moves on the basis of the expectations of the ECB rates, it is not certain that it will do so in a similar way, therefore we will have to wait a little longer to understand how the rates will change in concrete terms”, explain the experts of Facile. it. “It should be remembered, however, that the impact of increases will be different for each borrower based on the outstanding amount of the loan and the number of installments still to be paid: the closer you are to the end of the amortization plan, the lower the effect”.

Looking at market expectations (Futures on Euribor updated to 26 April 2023) it emerges that the increases could still continue; experts predict that the 3-month Euribor will not stop rising, reaching its peak in September 2023 with a value of around 3.76%; if these forecasts were correct, the rate of the average mortgage examined would exceed the psychological threshold of 5%, with an installment of around 737 euros, i.e. more than 280 euros more than that of January 2022. From here on, again according to expectations, the trend should reverse and rates start to drop so much so that the June 2024 quotations estimate the 3-month Euribor at around 3.22%, i.e. a monthly installment of 698 euros.

From Deutsche Bank to Barclays to Goldman, the banks that weather the storm

Sandra Riccio

01 May 2023

For aspiring borrowers who are grappling with the choice of mortgage today, which rate should you subscribe to? In this period, banks are pushing for fixed rates, especially long-term ones; this translates into low spreads and extremely competitive final rates (TAN). If we also combine the prospect of growth in variable rates, it is evident that in this phase the first option to evaluate is that of a fixed-rate mortgage, which not only guarantees the stability of the installment but, given the data in hand, is even cheaper than the starting installment of a variable mortgage. According to the simulations of Facile.it, taking into consideration the standard mortgage used in the previous analysis, the best fixed rates (TAN) available online today start at 2.99%, corresponding to an installment of 597 euros, while for a variable mortgage the best offer starts from a TAN of 3.70% (installment of 644 euros).