Mortgages, useful advice against the increase in installments. Report Fabi
What does Fabi's analysis of mortgages and non-performing loans say?
Analysis of non-performing loans and useful advice on mortgages. It is the heart of the latest analysis carried out by Fabi, the banking federation led by the general secretary Lando Maria Sileoni.
Here are all the details
The unpaid installments of mortgages and various loans by almost one million Italian families are worth 14.9 billion euros. This is supported by the FABI , indicating among the causes of the insolvencies "the increase in the cost of money, the increase in interest rates and the rush of inflation". Factors which, according to the union, "reduce disposable income and make it difficult for bank customers to meet loan deadlines".
Unpaid mortgage installments amount to 6.8 billion, consumer credit to 3.7 billion and arrears relating to other personal loans amount to 4.3 billion. According to the FABI, 5.7 billion are certain non-performing loans, 7.1 billion are probable defaults and approximately 2 billion are overdue installments.
1 MILLION ITALIAN FAMILIES IN BACKGROUND WITH BANK LOANS
The analysis of the total impaired loans of banks attributable to households is the result of FABI processing based on Bank of Italy statistics. According to the independent banking union, a "difficult situation" emerges in the country.
In fact, Italian families, squeezed between the grip of interest rates and the race for inflation and in arrears with maturities relating to bank loans, number "almost a million". Of the total of 14.9 billion in non-performing loans, 6.8 billion correspond to loans for the purchase of homes, divided between 2.7 billion in non-performing loans, 3.4 billion in probable defaults and 621 million in overdue installments.
The situation of consumer credits is more balanced, amounting to 3.7 billion: 1.2 billion of non-performing loans, 1.4 billion of probable defaults and 1 billion of overdue installments.
Other loans, such as personal loans requested without a specific purpose, generated 4.3 billion in non-performing loans: 1.7 billion in non-performing loans, 2.2 billion in probable defaults and 339 million in overdue installments.
THE DIFFICULTIES WITH VARIABLE RATE MORTGAGES
According to the FABI, the difficulties of families mainly concern variable rate mortgages, particularly affected by the increase in the cost of money, which, the union points out, "was raised from 0 to 4% in 11 months". This category of real estate loans is worth a total of around 140 billion and represents 1/3 of the total of 425 billion disbursed.
On a territorial level, Lombardy and Lazio are at the top of the ranking of defaults, with an amount of unpaid installments over 2 billion. Followed by Campania, Puglia and Basilicata, Sicily and Veneto, which exceed one billion, while Emilia Romagna, Piedmont, Valle D'Aosta and Tuscany remain just below this threshold. The value of the unpaid sums is more contained in the smaller regions such as Umbria where the unpaid installments amount to 226 million, Liguria (361 million) and Calabria (418 million).
THE PERFORMANCE OF MORTGAGES
Mortgages disbursed to Italians by banks reached 425.5 billion euros on 30 April. About 1/3 of the total, ie 140 billion, is made up of variable rate mortgages, reports the FABI.
Compared to the end of 2017, mortgages disbursed increased by approximately 50 billion, with an increase of 13.4%. Out of a total of 25.7 million Italian families, around 3.5 million have taken out a mortgage. Added to the figure are 6.8 million citizens who are also indebted with other forms of financing, such as consumer credit and personal loans, for a total disbursed of 251.2 billion euro. A figure, according to the FABI, "in line with the values of the end of 2017", but slowing down compared to the trend of the last few months. A sign, the latter, of the "negative impact of the increase in interest rates".
SILEONI: MORE CAUTION ON RATES
The secretary general of the FABI, Lando Sileoni, has asked the ECB for "greater caution on rates" and hopes for a "rethink" on the hike announced for next 27 July. “It is now clear – he affirms – that the action of the European Central Bank to fight inflation is not generating the hoped-for results”.
“Prices – he explains – are not falling significantly and the so rapid increase in the cost of money is causing a rise in interest rates on loans and mortgages which is putting both households and businesses in difficulty”.
“The ECB – underlines Sileoni – has already announced that it will bring the base rate to 4.25% on 27 July next. We hope for a rethink and, in any case, we hope that all future decisions will be taken with greater caution by the European Central Bank".
EXTENDING THE REFUND PLAN HAS A COST
Extending a repayment plan for a variable rate mortgage "is not free" for those who request it. Indeed, Sileoni underlined that "it must be clearly stated that any decision on initiatives by banks to give breathing space to families must be taken without anxiety and only after an adequate evaluation".
According to the trade unionist, "in order to receive the right advice and to be oriented towards making informed choices, the competence and professionalism of all bank workers must also be exploited, many of whom personally face problems identical to those of customers".
“In particular – explains Sileoni – it must be said that the mortgage spreader is not risk-free nor is it a zero-cost operation”. "The extension of the repayment plan of a variable rate mortgage – he concludes – in fact involves a greater amount of interest to be paid to the bank in addition to the fact that the possibility of being able to benefit, in the medium-long term, from a desirable reduction of interest rates”.
HOW TO LIGHTEN THE INSTALLMENTS
Alleviating the impact of the increase in the repayment installments of variable rate mortgages is the appeal addressed to banks in recent days. We therefore speak of spread-mortgages. But how can a reduction in the installment be obtained? Are there any risks for families? The proposals from the banks are varied: possible lengthening of the repayment terms of variable rate mortgages, insertion of a maximum rate variation ceiling, temporary suspension of the payment of the principal amount of the installments of variable and/or fixed rate mortgages. All the solutions, FABI reiterates, are not free for families and businesses, because each of them modifies the loan amortization plan, therefore, the "sensitization" of customers must be carefully evaluated. What is necessary is to pay attention to these aspects and evaluate their convenience according to the original characteristics of the loan (amount, duration, type of rate, fixed or variable, nominal interest rate, type of amortization) as well as the duration of the requested suspension. The lengthening of the installments involves a greater disbursement in terms of interest and can preclude customers from fully benefiting from a possible, and probable, drop in interest rates in the medium-long term.
THE RULES REGARDING DEFAULTS
Another fundamental aspect, FABI explains again, are the rules on default – which have been modified starting from 1 January 2021 with the publication of a European Union Regulation and specific guidelines by the EBA – aimed at standardizing the default classification criteria. The cases envisaged are: delay of more than 90 consecutive days, limit of 100 euros and greater than 1% of the exposure to the banking group for a private customer or SME, limit of 500 euros for companies and greater than 1% of the exposure to the corporate banking group.
In the past, there was no minimum threshold, the threshold was 5% and it was possible to offset against other unused lines of credit. In cases where a bank decides to propose a solution to lengthen the loan repayment schedules (this is equivalent to a debt restructuring) it is also necessary to pay attention to these rules. The risk is that the modification of the amortization plan for the extension of the loan is equivalent to a delay in the payment of the debt and if this occurs the debtor is classified in default with consequences for the bank (increase in non-performing loans and provisions) and for the customers (difficulty in accessing new credit).
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/mutui-consigli-utili-contro-laumento-delle-rate-report-fabi/ on Mon, 10 Jul 2023 05:43:50 +0000.