Mortgages, variable and fixed rates are approaching: how to navigate the new offers from banks

Mortgages, variable and fixed rates are approaching: how to navigate the new offers from banks
Mortgages, variable and fixed rates are approaching: how to navigate the new offers from banks
Emerging trends

The new upward adjustment by the European Central Bank impacts on the loan market, including mortgages, which have so far withstood the restrictive policy, confirming the interest of Italians in the real estate asset. The average age and income of the applicants are growing, while the amounts are decreasing.
The Observatory offers a series of indications on the dynamics of the sector in the first two months of the year, noting – among other things – the rapprochement between the fixed and variable benchmarks. The highest level concerns the 10-year IRS, which reaches 2.90%, one point more than the 2022 average, followed by the 20-year IRS (2.71%) and the three-month Euribor (2.48%). The 30-year IRS follows (2.36%) and the one-month Euribor (2.18%). In all cases the trend is growing, but it remains far from the levels of ten years ago, when the fixed rate was abundantly above 5% and the variable rate over 3%. Given the current situation (or, rather, the recent past), making forecasts is complicated, but the feeling among insiders is that the monetary tightening by the ECB is nearing its end. At the next meeting of the ECB, scheduled for May 4, the institute led by Christine Lagarde could take a break while waiting for the new economic indicators regarding inflation, production and consumption. In fact, central banks have to find a difficult balance between the need to contain inflation (by statute, the ECB must operate to keep it around 2%) and that of not depressing the economy too much.

The domain of the fixed

The increase in variable-rate benchmarks pushes requests for fixed-rate mortgages, which exceed 80% of the total, a good 20 points more than in the fourth quarter of 2022. After all, if the costs are similar, it is understandable that in many are oriented towards the installment which will not change for the entire duration of the contract. At the same time, the variable variable loses a fifth of its market share and stops below 16%, while the variable variable with cap falls from 8.7 to 3.1%. The rate hikes in recent months have given new life to subrogations by those who in the past had taken out a variable rate mortgage. In the first two months of the year, the switch to fixed-line loans involved more than 30% of all mortgage applications, eroding the incidence of contracts taken out to buy a first home, which in any case remain the most significant component of the market with just under 60% of the total.

The audience narrows

The recent rises in the rates applied to borrowers inevitably restrict the audience of those who subscribe to long-term financing such as real estate. In the first two months of this year, it reached 2,760 euros net per month against 2,220 in the first quarter of 2022. After all, the rate hikes by the central banks aim precisely at reducing the liquidity in circulation in the system, and for this way to contain consumer prices. Uncertainty about the future leads to limiting the outlay, with the loan to value (i.e. the portion financed compared to the purchase price) falling by one and a half points compared to the last quarter of 2022 to 65.9%. The need for security is also confirmed by the analysis of the contractual types of applicants, with open-ended contracts reaching 81.4% of the total against 79% in the first quarter of last year. At the expense of it are above all the atypical, who in one year pass from 5 to 3.9%, and the freelancers, from 2.4 to 1.5%.

Benefits under 36 to the test

As for the average age of the applicants, it stands at 40, a figure not far from the previous quarters. In the next surveys, it will be necessary to see if there will be a return of young people after the government has remodulated the measures in favor of the under 36s for 2023, a measure which, however, at least for now, is not having the same effect seen at its launch in July 2021. Meanwhile the average amount requested drops to 131,000 euros, 10,000 less in a year, even with real estate prices remaining essentially stable in the last period. Therefore, this trend could indicate a greater concentration of the market on medium-low cost housing than in the past. While the average duration is around 24 years.

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