Is state aid right for those with a variable rate mortgage?
Because the government decree that, with the tax on the so-called extra profits of the banks, intends to help those who have signed up for a variable rate mortgage, causes discussion
It is perhaps the measure that is making its effects felt the most, in terms of performance on the stock exchange and political and technical comments. Let's talk about the tax on the so-called extra profits of the banks, contained in the Asset decree approved on Monday evening by the council of ministers, which according to the intentions of the government should go to the rescue of Italians with variable rate mortgages who have seen the monthly payment increase – sometimes even quite a lot – due to the rate hikes decided by Christine Lagarde's ECB.
This morning Matteo Salvini, Deputy Prime Minister and Minister of Transport, repeated it to the microphones of Radio Anch'io, the program broadcast on Rai Radio 1. "Some bankers regretted it, but we are talking about a sector that is making billions and billions of euros of earnings without lifting a finger and therefore it is a work of redistribution economically if socially dutiful”. He then added that the resources resulting from the tax “will reach those who have a mortgage that is increasing disproportionately and will end up in the Budget Law for the cut in taxes and the increase in salaries. The main five Italian banks – Salvini said again – in the first six months made more than 10 billion in profit because they increased the costs for those who have a loan, but they did not increase the interest for savers. So the banks have been very quick to increase costs, but they have not been as quick to increase interest and they are grinding up billions and billions of euros, which the Italians are paying".
THE REAL NUMBERS ON VARIABLE RATE MORTGAGES
In reality, however, according to what emerges from a Prometeia study, based on aggregate data from Bank of Italy and dedicated to mortgages and the financial fragility of Italian families, only 18% of variable-rate mortgages disbursed in our country in 2022 (approximately 14 billion out of an amount of 79 billion) last May presented the conditions for making a fixed-rate subrogation convenient. The survey, reported by Il Sole 24 Ore , seeks to understand why in Italy the increases in fixed rates have been much earlier than the adjustments to the variable rate.
Another interesting aspect that can be traced in the study – and which helps to reduce the impact of the tax – is that, although variable-rate mortgages are quite widespread (40% of the total in December 2022), the number of families who risk however, the possibility of being in serious difficulty as the monthly payment increases is limited. In fact, the survey reveals that the floating rate would be preferred by people generally not on low incomes. The calculation is easy: there are around 5.5 million families in the lowest income bracket in our country and of these, only 1.8% – or around 99,000 – have a variable rate mortgage. Furthermore, not all but half of these are in fragile financial conditions. “We don't think the picture is worrying; even if it is true that, while not going into difficulty, families find themselves having to cut consumption – is the comment reported by the Confindustria newspaper by Lea Zicchino, senior partner and head of Prometeia's markets and financial intermediaries analysis practice -. Looking ahead, inflation is, in any case, coming down. It is true that nominal incomes have not risen as much as inflation and therefore real income has fallen. But we do not expect an increase in the default rate of loans, especially for those linked to mortgages”.
THE FIGHT BETWEEN CICADAS AND ANTS ON MORTGAGES
The debate on the tax, as we said, immediately ignited. Andrea Giuricin, economist and CEO of Tra consulting, refers to the Aesopian tradition, paraphrasing the fable of the grasshopper and the ant. “There was a young man who had bought a house with many sacrifices with a fixed-rate mortgage – he writes on Twitter -. He had done this to hedge against the risk that rates could rise, clearly by paying something more than a variable rate. Then came the rate hike, and the provident young man was happy with his flat rate. Suddenly the provident politician arrived and said that it was necessary to tax the extra profits of the banks and this money would go to those who had made the variable rate. Unfortunately, bank commissions increased due to the increase in taxation and the young man who had made the fixed rate had to pay more for banking services. Moral of the story? Don't be an ant in the country of cicadas. There will always be a politician who takes from the ants and gives to the cicadas”.
THE DOUBTS OF PENATI
The economist Alessandro Penati is also rather hesitant about the tax who writes in Domani : “The fact that the tax is then a way to reduce the cost of mortgages on first homes is pure demagoguery (but, alas, effective). How much of the tax will be used as a mortgage subsidy? By what criteria? Who qualifies? And how will this umpteenth bonus, subsidy, facilitation be managed, which like the previous ones is only the cause of inefficiencies, abuses and bureaucracy?”. Furthermore, according to Penati, "with this scenario, taxing the margin today could prove to be a boomerang because it curbs the propensity of banks to grant loans".
Commenting on Giuricin's tweet, quoting Penati, Mario Seminerio intervenes: “As often happens to me, I agree with Alessandro Penati. This is a ploy out of financial desperation as well as bipartisan populist posturing, and it will backfire,” writes the founder and promoter of Phastidio.net .
MARATTIN'S SURPRISE
It is then another economist, the parliamentarian Luigi Marattin of the Azione-Italia Viva group, who underlines a last-minute novelty: "The reading of the decree approved yesterday reserves us other surprises: the revenue does not go to help those who have an existing variable rate mortgage, but simply to replenish the fund that grants guarantees for those who have to take out a new mortgage now”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/aiuto-mutuo-tasso-variabile-giusto/ on Wed, 09 Aug 2023 08:45:38 +0000.