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Mortgages, the truce is not over

29 December, Il Sole 24 Ore

It will be another good year for Italians that chose the floating rate mortgage, representing two-thirds of the mortgages, even though the fixed rate has been the most popular option in the last three years. Thanks to the ECB that will continue introducing liquidity in the markets, even though a slower pace than in the past, the Euribor, the rate determining the interest rates on mortgages, won’t increase.

We’ll have to wait till the second part of 2019, or even the year after, for a new rise of the interest rates in the eurozone (the first after summer 2011), according to the analysts. For this reason, there are no significant increases of the interbank rates coming up, as they haven’t changed in the last two and a half years and they still have paradoxically the negative sign since then. The market expects to be back to the positive sign in two years and to surpass the threshold of 1% not earlier than 2023.

Therefore, rates will stay well below the average. The payment issues that are still concerning many families, as proved by the over 150 thousand suspension requests received by Abi since March 2015 (more than 2 thousand in 2017), won’t be due to the instability of the rates, rather due to reasons connected with household budgeting and the consequences on the long recession.

For those who’ll have to choose a mortgage in 2018, the rates condition will be rather good, similar to the conditions of 2017. Considered that the Euribor should stay with a negative sign, the levels of Eurirs, used to determine the fixed rate, might increase, as the ECB is going to close the plan for the purchase of government securities. The choice of the instrument will depend on the offers (and strategies) of the banks. Just like 2017, year of the absolute preference of the fixed rate.

We’ll have to consider, however, the decrease of new mortgages, not necessarily due to the debts of banks. In fact, the last year saw a good number of subrogations (basically replacing an already existing product with a new one at better conditions), even though their issuance slowed down over the last months. The reason is very simple: as families see the range of new products agreed at rates close to zero and a competitive spread widening, the chances to improve their current situation reduce.

“The mortgages issued in the last two years are hardly replaceable, and the weight of the subrogations will be heavier in the long term”, confirms Roberto Anedda, marketing director for Mutuionline.it, adding also that in the near future, “the products underwritten for the purchase of a house will have a more relevant role in the future”. But house prices have significantly reduced without giving a new impulse to sales. In fact, many prefer to wait for prices to drop further, favoured also by mortgages destined to stay convenient on the long term: a big paradox.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

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