Rome, 7 June 2024 – The ECB (European Central Bank) has cut interest rates. Between the advantages that the decrease in the cost of money will bring about a decrease in the installments of variable rate mortgages. But how much will the installments really drop? Codacons took care of making a calculation. The consumer association took some mortgages of different durations and amounts and carried out simulations.
How much mortgages drop with the ECB rate cut
The decline in mortgage payments
Codacon has carried out some simulations on the reduction of the installment for i variable rate mortgages:
- For a 20-year mortgage for an amount of 100,000 euros the saving on the monthly installment will be 13 euros with a monthly saving of 156 euros
- For a mutual always 20 years but for an amount equal to 200 thousand euros there monthly installment will drop by approx 27 euros with an annual reduction of 324 euros
- 30 year mortgage for an amount of 100 thousand euros, the rate cut of 0.25% will produce an average saving of 15 euros per month (180 euros per year)
- For a mortgage always lasting 30 years stipulated for an amount of 200 thousand euros the savings on installment of each month will be of 30 EUR (-360 euros per year)
- For a mortgage of 125 thousand euros at 25 years of age, however, a similar cut translates into a saving of approximately 17 euros per monthwith an impact of 204 euros on an annual basis.
Other advantages for families and businesses
But those on mortgages will not be the only advantages linked to reduction in the cost of money decided by the ECB. With lower rates, business credit is more accessible. A relief that can translate into a increase in business investments and push the economic growth and employment. Organizations such as Cna, Confesercenti and Coldiretti are now calling for a robust and rapid drop in rates also to fully seize the opportunities offered by the Pnrr.
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The rate cut is a breath of fresh air for Italian public debt: the interest to be paid on a loan is lower public debt came to touch the 2,900 billion. The Parliamentary Budget Office calculates a possible savings of 3 billion this year in anticipation of an overall decrease in ECB rates by 100 basis points during 2024. Savings that become larger next year, reaching 7 billion, and then rising to around 10 billion the following.
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Further reductions in sight?
Different analysts they estimate that there could be further interest rate cuts in 2024, perhaps as early as September. There ECBwith the president Christine Lagardehowever, he put his hand forward by raising the estimates of theinflation expected for the next few months (a factor that would make a rate cut less likely), underlining that “every decision will be taken from time to time based on the data”. In any case, already in recent months the Mortgage payments had begun to fall with the banks and interest rates that had “anticipated” the ECB’s choice.
