Adjustable rate mortgage: the new pain in sight

These are tough times for anyone with an adjustable rate mortgage. The installments, which have already increased significantly in recent months, may actually increase again. According to Facile.it’s simulations, if the ECB approves a new rate increase of 50 basis points on February 2, the average installment of a loan could increase by around 35 euros in the coming months. Therefore, in a little over a year, the borrower will find himself paying a heavier installment of over 195 Euros, ie about 43% more than the first installment. This is what we read in an analysis of the online comparator.

Variable rate mortgage increases

Facile.it analyzed a €126,000 variable rate loan signed over 25 years signed in January 2022, analyzing how the installment has risen since it was signed and how BCE could rise further in the coming months following the rate hike. The initial rate (Tan) subscribed in January 2022 and used in the analysis is equal to 0.67%, corresponding to a monthly installment of 456 euros.

Since the second half of last year, the installment started to increase significantly due to the four hikes in the cost of money agreed by the European Central Bank and reached 619 euros in January 2023 and if, as mentioned earlier, the ECB will decide whether to raise the rates by another 50 basis points and Euribor if it grows similarly, the borrower’s monthly payment will reach around 653 euros in the coming months, or 197 euros more (+43.2%) than in January 2022.

The interest rate race may not stop with the February announcement: looking at market expectations (Euribor futures), experts predict 3-month Euribor to grow even further, reaching around 3.4% in June 2023: if forecasts are correct, the debtor’s installment in January It will reach 711 euros, which is 255 euros more than signed in 2022.

“If it’s true that Euribor is moving in line with expectations of ECB rates, and it’s not certain that it’s growing in a similar fashion to central bank indices, last year showed us how closely the two values ​​are related,” explain the Facile.it experts. “To protect against future price increases – experts explain – borrowers can resort to succession or renegotiation, possibly taking advantage of the conditions introduced by the Government’s Budget Act. There is certainly no better solution than the other; the advice is if you want to switch from variable to flat rate, consult with a consultant to determine the best solution for your needs. to communicate”.

Source: Today IT

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