Mortgages are getting cheaper and the next interest rate cut by the ECB in June could lead to a further one monthly reduction. Today, for the fifth consecutive time since July 2022, the European Central Bank confirmed the cost of money unchanged. The rate on main refinancing remains unchanged at 4.50%, that on deposits at 4% and that on marginal loans at 4.75%. But President Christine Lagarde has given signals that seem to confirm the rate cut in the summer.
After difficult years, with the progressive increase in the cost of money which has seen housing financing skyrocket, an increasingly significant breath of fresh air is arriving for indebted citizens. The decline in mortgage rates continues in February: the Bank of Italy reports that loans to families were disbursed with a Average APR, including ancillary costs, of 4.31% (against 4.38% in January). Let’s see in detail how much mortgage payments cost today and how much they could drop in the coming months.
The drop in mortgage rates to 4.31% revitalizes consumption and retail sales
The turnaround
Fixed rate mortgages are finally reversing course, with the first drops on the cost of the monthly installment after two years of increases. The effects of the stop to interest rate increases can already be seen and are now expected first ECB cuts, which will bring benefits of tens of euros into citizens’ pockets. In these conditions, therefore, in the coming months those who are paying high interest on their loan could opt for subrogation. This is the mechanism by which you change your mortgage, choosing another bank and improving the conditions for disbursement of financing.
Mortgages, are savings of 100 euros per installment coming? What can change with the ECB rate cut in June
By how much mortgage payments are falling
According to current data, considering the amount and average duration of a loan for the purchase of a house, the drop in rates means that the instalment, for those who have now taken out a variable mortgagedrops on average by 48 euros per month compared to the peak of November 2023calculated the National Consumer Union. We are talking about an annual saving of 576 euros.
Mortgages, rates still falling: APR for the house installment drops to 4.31%. Now consumption is rising
The drop in the Taeg
According to the report by Koch Palace entitled “Banks and money: national series”, then, the share of these loans with initial rate fixation period up to 1 year was 17% (22 percent in the previous month). The APR on new consumer credit disbursements stood at 10.59%. Interest rates on new loans to non-financial companies were instead equal to 5.34%. The ECB’s decision on interest rates is expected today, which according to analysts should remain unchanged.
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What changes with the ECB rate cut
From now on, analysts’ forecasts, as mentioned, are for a possible first rate cut by the ECB of 0.25% by June-July. To which a second one of 0.25% or even 0.5% could be added in the autumn: thus the variable installment should fall by at least 20-40 euros per month in June and at least others 30-50 euros in December.
In the case of a loan signed in January 2022 with a duration of 25 years for an amount of 126,000 euros – it is highlighted – the mortgage installment reached reach 752 euros in December 2023, with an initial cut of 50 basis points in the cost of money it could drop to 712 euros, with a saving of 40 euros per instalment. With further rate cuts by the ECB, the installment at the end of the year could stand at 657 euros. That is to say almost 100 euros less by December. By extending the time horizon, in June 2025 the installment could slip to 633 euros, or approximately 120 euros less. According to experts, however, to find new offers of fixed rate mortgage around 2.7%-2.5% you may have to wait until the end of the year.
The drop in mortgage rates to 4.31% revitalizes consumption and retail sales
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