"The ECB's Monetary Tightening and Its Impact on Mortgages and Lending in the EU: Fixed Rates Gain Preference as Euribor Remains High" – Archyworldys (2023)

by Giuseppe Gaetano, Editor-in-Chief

With “core inflation” in the EU at 5.6%, the ECB cannot say that it has completed the series of monetary tightening harmful effects on the mortgage business, but also on the lending businessby reducing the granting of the TLTROs that underlie the provision of bank credit to the non-financial private sector.

Euribor will not go down before 2024, and with some further increases in the cost of money in July and September, the rate of a floating rate could exceed +60% per year and that of the fixed rate twice by the end of the year. The situation seems to say: If you can reduce the remaining debt, otherwise the fixed interest rate is worth it for the time being to consumers both for new mortgages, provided the variables do not fall below 4%, and for renegotiation with one’s own institution or subrogation with another. MutuiSupermarket claims that the landline received over 95% of the preferences on its online portal in April, e.g Savings on the variable are expected to increase in the coming months. It’s strange that a fixed-rate mortgage for the same amount and term actually costs about 80% less today than it did about thirty years ago. Telemutuo has made a “generational” comparison between the final price of a 30-year mortgage loan taken out by a young man now and in 1990 to buy his first home: the amount for an amount of 100,700 euros (equivalent to 195 million old lire) now amount to €162,000 versus the equivalent €292,000 paid by the ‘parents’ even if they had renegotiated the original rate over time. At that time, the interest rate applied by the banks was actually around 14%, compared to an inflation rate of 6.5%.

„Financing conditions for buying a house have improved in recent decades – explains Angelo Spiezia, CEO of Telemutuo – Not only given the fall in interest rates, but also because of the benefits offered by the 2007 Bersani decree, which guarantees the possibility of subrogation, allowing the borrower to optimize his mortgage loans according to market conditions“. Let’s go back to younger times in February 2023, the total value of mortgages was 426 billion euros. Out of 25.7 million Italian families, 3.5 million have a mortgage, and out of a total of 6.8 million (25%) they are also in debt through other forms of financing, mainly consumer and personal loans, which is also slowing. With the interest rate hike for Lando Maria Sileoni, Secretary General of Fabi, who recently published these data, there is a risk of a sharp slowdown in real estate, construction and corporate investment, with repercussions on the quality of employment.

As for the first sector, the trend is towards smaller objects, which are proportional to the decreased purchasing power, but the owners are not afraid of devaluations or extensions of the sale periods. In fact, not only are mortgages back to where they were before the unrepeatable anomaly of zero interest rates, which would end sooner or later and slow down business, but they are too Real estate prices that don’t go down (Italians with more than one registered address officially reach almost 30%) and average salaries that are not increasing (and falling due to the high cost of living). Interest rates over 25 to 30 years for mortgages of 70% and more are now well over twice the amount requested and half the value of the same property purchased: according to an average calculated by Corsera, a worker in Milan can expect to pay €1,500 net per month Now the best I can afford is a one-room apartment. Even the Consap fund’s 80 percent guarantee on first-home mortgages for under-36s — after initial success with a peak of 8,000 applications in May 2022 — began to dwindle compared to last fall, until it dropped to 2,524 payouts last February, according to the latest available data.

Credit intermediaries and mortgages: the thing about Credit Agricole and Banco BPM

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2023-05-17 19:08:50

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