The shock on mortgages has so far not occurred. Mortgage lending rates are in fact keeping at historic lows, because for now a limited number of institutions have adjusted the spreads by a few cents while the benchmarks for defining the price remain at the lowest levels ever. As regards fixed rates, the 20 and 30-year Eurirs stand at around 0.10%; the Euribor, which determines the cost of the variables, at -0.48% as regards the monthly parameter while the quarterly one at -0.37%. As regards the rates, the best conditions (average of the five most convenient products) according to the data obtainable from the broker mutuiOnline.it on loans for an amount of 120 thousand euros and a house worth 200 thousand, the 20-year fixed loans are set at 0, 59% nominal and 0.77% effective, for a monthly payment of 530 euros.
The variables of the same duration are even more expensive, with an average of 0.60%, an effective rate of 0.73% and an installment of 531 euros. For thirty years, the natural order of things is restored and the fixed ones cost more than the variables. In fact, fixed products are at an average nominal rate of 0.98% against 0.75% of the variables. The effective rates are at 1.11% against 0.88% of the indexed and finally, in terms of installment, the fixed ones cost 14 euros more: 385 euros against 371. With these data it is quite obvious that the vast majority of those who asks for a mortgage (around 90%) opt for the rate, fixed even if it must be said that at the moment no one expects that for at least the next five years the Euribor will be able to return to positive territory and least of all that such an increase can be recorded the sustainability of the installments is to be jeopardized. An interesting fact to note that for the moment most banks have not applied increases for those who ask for loans with a high ratio but still within 80% between the required capital and the value of the mortgage. So anyone who wants to do the bigger home operation is right to think about it now.
A modification of these conditions, if the home market will begin to show a drop in prices, not unlikely. It must be said that the beating of the NPL (bad loans) accused between 2010 and 2015 has taught our institutions a lot, given that from 2016 to the end of last year, bad debts for the purchase of houses fell by 14.3 billion (from 25.8 to 11.5 billion). The risk reduction occurred with more refined creditworthiness assessment techniques but some rather disturbing signals comes from the estimates on the moratorium on mortgages launched by the Italian care decree and which, we remember, consists in the possibility of suspending payments of installments up to 18 months and to be able to resume paying, once the terms of the suspension have expired, giving the bank only half of the interest accrued in the period, with the other half borne by the State. According to Nomisma estimates, in May 9% of borrowers had already applied for suspension and another 15% would intend to submit the request. These are numbers that give the sign of a widespread economic unease and could lead banks to become even more cautious for new disbursements. Prudence, however, can be reasonably relaxed for subrogation requests, as the residual debt is normally quite low compared to the mortgage value.
The conditions are slightly more onerous than those of the purchase mortgages, because, at such risky rates, the bank must necessarily recharge the interest income from the preliminary investigation and the notary costs it has to bear on the rate. On a fixed rate subrogation, again from mutuiOnline.it, we obtain that the average rate for an operation from 120 thousand euros to 20 years for a house worth 200 thousand of 0.77%, with an installment of 540 euros. If those who ask for scrapping have a 1% loan in progress, changing the bank achieves a saving of 12 euros per month, and maybe it’s not worth it. If you are paying 1.5% the savings go up to 39 euros and at a rate of 2% you get to 67 euros. If he pays a rate above 2% he should instead wonder why he didn’t think of it before.