All the effects of the ECB’s maneuvers on household loans. Report Fabi
The increase in interest rates decided by the ECB and the effects on loans to households. Numbers, comparisons and scenarios according to the Fabi report
How many mortgages are disbursed by Italian banks? And how much is consumer credit? How many households are in debt? And how have the installments of the various types of financing changed in the light of the increase in the cost of money, raised last year by the European Central Bank to 2.5%? In view of the next ECB meeting scheduled for Thursday 2 February, which could approve a new increase of half a basis point, bringing the base rate to 3%, here are some data and forecasts on how household credit has changed in our country, according to a report by Fabi, the largest banking union, led by the general secretary Lando Maria Sileoni.
Here is a summary of the data processed by Fabi.
There are 6.8 million indebted households in Italy, equal to approximately 25% of the total: of these, 3 and a half million have a mortgage to purchase a house.
During 2022, interest rates on loans have increased significantly and new increases are inevitable if, as expected, the cost of borrowing is further increased. Buying a car in installments today, for example a 25,000-euro model, costs, in the case of a ten-year loan at a rate of 10.9%, almost 5,000 euros more than in 2021.
As far as new mortgages are concerned, the installments of fixed-rate ones have almost doubled, while for those with variable rates, the monthly "repayment" has risen by 24%. In more detail, for a fixed-rate mortgage of 200,000 euros over 25 years (the average rate applied by banks is 3.9%), the monthly installment is 1,056 euros; for a loan of 100,000 euros, also for 25 years, with an interest rate of 3.7%, the monthly payment is, however, 517 euros. As for old mortgages, on the other hand, there is no difference for those with fixed rates, while the installments of those with variable rates have undergone increases of up to 43%.
Below are the details of the report edited by Fabi.
BANK LOANS TO HOUSEHOLDS
The total value of mortgages for the purchase of homes amounted, at the end of November, to 426 billion euro, up by 50 billion compared to the end of 2017 (+13.5%).
Out of a total of 25.7 million Italian families, those who have a mortgage are around 3.5 million, out of a total of 6.8 million citizens who are also indebted with other forms of financing, such as consumer credit and personal loans.
Between consumer credit and personal loans, banks have disbursed 256 billion euros of loans to citizens, an increase of around 2 billion compared to 2017 (+1%).
THE RISE IN ECB RATES AND MORTGAGE INSTALLMENTS
The installments of old fixed-rate mortgages, i.e. those disbursed until the end of 2021 / beginning of 2022, do not change and will remain unchanged until the end of the repayment plan.
The installments of old variable-rate mortgages have grown by an average of 43%: this means that those who used to pay an installment of around 500 euros a month now pay 715 euros a month, i.e. 215 euros more.
The new fixed-rate mortgages have gone from an average interest rate of around 1.8% to even over 4% with monthly installments which, therefore, can even be doubled on the basis of bank offers.
New variable-rate mortgages have reached 2.8% from 0.6% at the end of 2021: this means that for a 150,000-euro loan with a duration of 20 years, the monthly payment is now 825 euros, a good 160 euros more (+24%) compared to what would have been obtained a year ago or 665 euros.
MORTGAGE SIMULATION OF 100,000 OR 200,000 EUROS
Mortgage €200,000 – interest rate 3.9% – duration 25 years – monthly installment €1,056
Mortgage €100,000 – interest rate 3.7% – duration 25 years – monthly installment €517
CAR OR HOUSEHOLD APPLIANCE IN INSTALLMENTS: HOW MUCH DO I PAY TODAY?
At the end of 2021 the average interest rate was 8.1%, today it is 10.9%:
- to buy a 25,000 euro car entirely in installments, with a 10-year loan, the total cost goes from 37,426 euros to 42,272 euros, with an overall difference of 4,847 euros (+13%)
- to buy a 750-euro washing machine entirely in installments, with a 5-year loan, the total cost goes from 942 euros to 1,012 euros, with an overall difference of 70 euros (+7.5%).
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/ecco-gli-effetti-delle-manovre-della-bce-sui-prestiti-delle-famiglie-report-fabi/ on Mon, 30 Jan 2023 10:05:14 +0000.