Bank of Italy raises the alarm for families: “Most vulnerable families”

Italian households are more vulnerable but still less indebted than the eurozone average. The alarm was sounded by the Bank of Italy in its Financial Stability report 2023. «The deterioration of the economic situation – explains the Bank of Italy – has a moderate impact on the risks associated with the financial situation of families. Liquidity remains high, but in real terms disposable income has declined due to inflation. Rising interest rates are being reflected in the average cost of outstanding borrowing and the share of financially vulnerable households could increase this year. In terms of income, indebtedness remains well below the eurozone average».

According to the projections of the Bank of Italy’s microsimulation model, “the vulnerability of households would increase moderately during this year. The share of vulnerable households would be 2.5 percent (of which 46 percent are indebted to a variable rate mortgage to purchase a home), an increase of about half a percentage point, while the share of those inmates would rise by just under 2 percentage points, reaching 9.6 percent”. Additionally, household indebtedness continues to decline in relation to disposable income (62.5 percent at the end of the fourth quarter of 2022, compared to 64.4 in the same period of the previous year). It is more than 30 percentage points lower than the euro area average for the third quarter of 2022 (latest available data). In December last year, credit for house purchase grew by 4.7 percent (but remained stationary in real terms.) Faced with rising interest rates and tightening credit conditions, new disbursements slowed down since the last months of 2022. A slight contraction of stocks was observed in January and February 2023» The high prices are felt in the pockets of Italians.

Source: IL Tempo