(Finance) – As anticipated in recent days by Christine Lagarde, on March 16 the European Central Bank should proceed to a new increase in the cost of money which, for those who have a average mortgage at a variable rate, could translate into an increase of 35 euros on the loan installment. In just 14 months, therefore, the increase would reach around 237 euros, i.e. 52% more than the original installment.
To analyze how rates have grown and as yet they could increase following a new rate hike from the ECB (we are talking about 50 basis points), Facile.it examined a variable-rate loan of 126,000 euros over 25 years signed in January 2022.
The starting rate (Tan) used in the analysis it is equal to 0.67%, corresponding to a monthly payment of 456 euros. Starting from the second half of 2022, the European Central Bank decided to counter the growing inflation by increasing the cost of money several times, a choice that has already helped to significantly increase the variable mortgage rate (which reached almost 4% in March 2023 ) increase which, as mentioned, does not seem destined to stop and indeed with the feared further increase in ECB rates of 0.50% could bring the monthly installment of the standard mortgage even to around 693 euros.
“To understand how they will change in the rlenders’ installments are real we will have to wait to see how the Euribor will actually move, but those who are grappling with price increases have some important tools at their disposal today”, explain the experts of Facile.it. “You can choose to substitute the loan, switching to a fixed or a more convenient variable or, if you are eligible, renegotiate the loan with your bank by taking advantage of the new rules introduced by the Government. Since there is no absolute best solution over the other, the advice is to contact a consultant so as to identify the option that best suits your needs”.
The increase of however, March may not be the last; looking at market expectations (Futures on the Euribor), the experts forecast that in June 2023 the 3-month Euribor could reach around 3.80%; if these forecasts were correct, the rate of the average loan examined would reach around 5.04% and the installment to a good 740 euros, i.e. more than 280 euros more than that of January 2022.
To cope with the increase in installments, and protect themselves from further future increases, many borrowers are considering the possibility of changing banks; confirming this trend comes the data from the analysis which has highlighted how the requests for subrogation have started to grow again and, in the first two months of the year, represented almost 20% of the total loan applications, a value that doubled compared to the same period last year.
However, the increase in interest rates also affects the prospective borrowers, who today have to deal with less favorable conditions than in the past. It is not surprising to see that, in recent months, those who have applied for financing for the purchase of their first home have aimed for smaller amounts than in the past. Also according to the analysis, in the first two months of 2023 the average request for mortgages
first home fell to 136,935 euros, a value down by 7% compared to the same period in 2022.
“The gradual decrease in the requested amounts, already underway since the second half of 2022, is closely related to the increase interest rates”, continue the experts. “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 so as to lighten the monthly installment, in others it is the bank itself which, to preserve the installment/income ratio, is forced to resize the request”.
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