Here’s what the ECB effect will be on mortgages and loans. Reports
The Autonomous Italian Banking Federation (Fabi) has analyzed how the ninth rate hike by the ECB will affect mortgages and loans. Facts, numbers and the comment of the general secretary of Fabi, Lando Maria Sileoni
What will be the ECB effect of Lagarde on mortgages and loans?
The Autonomous Italian Banking Federation (Fabi) estimates the effects on mortgages and loans with the rate hike in view of the July meeting of the European Central Bank (ECB) which, as announced yesterday by its president, Christine Lagarde, should approve a new increase by a quarter of a percentage point, taking the base rate from 4% to 4.25%.
THE EFFECTS OF THE ECB RATE RISE ON MORTGAGES ALREADY INITIATED…
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 discounted with the cost of borrowing further increased to 4.25%.
… AND ON BUYING A CAR
Buying a car in installments, for example a 25,000-euro model, could cost, in the case of a ten-year loan at a rate of 13.65%, more than 9,800 euros more than in 2021.
WHAT WILL HAPPEN TO NEW (AND OLD) MORTGAGES
As far as new mortgages are concerned, the installments of fixed-rate ones are set to double in 2023, while for variable-rate ones, the monthly repayment should rise by 60-70%.
In more detail, for a 200,000 euro fixed-rate mortgage over 25 years (the average rate applied by banks could be higher than 6%), the monthly installment will be 1,341 euro; for a loan of 100,000 euros, also for 25 years, with an interest rate of 5.6%, the monthly payment will instead be 627 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 75%.
SILEONI'S COMMENT
“The decision is understandable, because so far the drop in inflation has not been as hoped for. But we have already had eight rate hikes in 11 months and July will be the ninth. This was stated to Ansa by the general secretary of Fabi, Lando Maria Sileoni, commenting on the data of the Fabi on the new, probable increase in the cost of money.
“In doing so – he adds – families and businesses are strangled. Rate hikes can also be established, but they must be spread over several years. The positive aspect is for the banks and we will enforce this aspect with the renewal of the national collective labor agreement, asking for significant economic increases for the 280,000 workers in the banking sector. However, we cannot ignore the fact that families will be in difficulty, social inequalities will be wider and poverty may increase. Those who wanted to apply for a mortgage to buy a house, the dream of a lifetime, will probably have to postpone their project. We need more incisiveness on the part of the Italian banking sector in the recognition of lending rates towards current account holders”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/ecco-quale-sara-leffetto-bce-su-mutui-e-prestiti-report/ on Sat, 01 Jul 2023 06:27:49 +0000.