The race in interest rates makes the mortgage a mirage: to get the loan you need an income higher than 27%

The great race in the price of money risks cutting Italians out of the mortgage market. According to an analysis by Facile.it, with current rates, 18.6% of borrowers who applied for a mortgage last year would today not be eligible to submit an application, i.e. they would not respect the installment/income ratio (normally equal approximately 1 to 3) used by banks as a selection criterion for the disbursement of loans. Not only; the analysis of the comparator has highlighted how, with the same installment, the purchasing power of a new borrower has dropped by 22% in just one year and today, to buy a house with a mortgage, you need to have an income 27% higher % compared to twelve months ago.

The simulation
In evaluating the aspiring borrower, the banks ensure that the amount of the requested installment does not exceed, approximately, one third of the available salary (net of other loans or economic commitments of the household); today therefore, due to rising rates, would-be borrowers have to deal with higher installments which, in fact, complicate access to credit by families.

The comparator draws attention to one fact: looking at the installment/income ratio of borrowers who applied for a mortgage in February 2022, Facile.it estimated* that, for the same amount, with current rates, 18.6% of those applicants would not have been able to obtain the loan because they are outside the installment/income ratio, a percentage that could rise further in the coming months if rates continue to rise.

Looking for example at the best rates available online, in February 2022 the monthly installment of a standard fixed-rate mortgage (126,000 euros at 70% to be repaid over 25 years) was equal to 482 euros; this means that the applicant, in order to obtain the loan, had to have a net disposable monthly income of at least 1,450 euros. Today, for the same loan, the best monthly installment is 615 euros and the applicant, to obtain the loan, should have a disposable income of at least 1,845 euros. For the same amount, therefore, to have the loan application accepted, a salary 27% higher than last year is required.

Middle school
The alternative is to focus on smaller amounts, so much so that the Facile.it observatory has highlighted how, in the first two months of 2023, those who applied for funding for the purchase of their first home asked for , on average, 136,935 euros, a value down by 7% compared to the same period of 2022. “The gradual decline in the amounts requested, which has already been underway since the second half of 2022, is closely linked to the increase in interest rates,” he says Ivano Cresto, Managing Director of Facili.it financing products. «In some cases it is the aspiring borrower who, in order not to give up on the purchase, chooses to focus on a smaller amount to lighten the monthly installment, in others it is the bank itself which is forced to reduce the request to preserve the relationship installment/income. Ratio which – recalls Cresto – can vary from bank to bank and for this reason the advice is to get help from a consultant in choosing the institution to which to apply for funding».

Purchasing power down
The increase in rates therefore translated into a drop in the purchasing power of borrowers; if in February 2022 with a monthly installment of around 482 euros it was possible to obtain a fixed mortgage of 126,000 euros, today, with the same installment, one can aim for a mortgage of just 98,695 euros, i.e. 22% less.

“In order not to reduce the amount requested, would-be borrowers can choose to lengthen the duration of the loan, also taking advantage of the particularly advantageous conditions that 35 or 40-year mortgages have today”, concludes Cresto. «This would make it possible to lighten the weight of the monthly installments and to preserve the installment/income ratio, without giving up the capital.».