Mortgage and loan rates continue to rise: money has never been more expensive

The sirens of economic stagnation, the contraction of credit and the doubts of economists and entrepreneurs did not stop the European Central Bank: the Frankfurt governing council decided to increase the reference interest rates even further. An increase of 25 basis points puts the bar at the highest point ever reached since the introduction of the euro. For those with variable-rate mortgages in Italy, this means an additional increase in installments of between 15 and 25 euros per month, according to experts. According to Codacons’ estimates, a family today pays an average of 300 euros more per month since the ECB’s bull run began; This is 4 thousand euros more per year compared to 2021.

The good news for variable interest raters is that Frankfurt may have reached the ceiling at which rates will no longer rise. From September 20, interest rates on major refinancing operations, marginal refinancing operations and deposits at the central bank will be increased to 4.50%, 4.75% and 4.00% respectively, exceeding the hitherto unbeaten record of 2008.

Doubts over ECB’s moves

On the eve of the Governing Council meeting, many analysts hypothesized that the ECB wanted to pause its increase policy. In fact, there are those who put pressure on Frankfurt from many quarters regarding the repercussions of these increases on both the public coffers of some states (especially Italy) and the real economy, due to the low tendency of institutions to provide loans and mortgages. . On the other hand, if the interest rate increase was expected to stop inflation in the Eurozone and bring it to the warning level of 2 percent, the result so far has been disappointing. The European Commission’s latest economic forecasts show inflation will be 5.6% for 2023 and 2.9% for 2024. Moreover, Brussels’ predictions increase the chances of a recession, starting with Germany, which has put more pressure than anyone else to raise interest rates.

The divisions were within the ECB itself, as Governor Christine Lagarde acknowledged: At the governing council meeting, she explained at a press conference: “There was a lot of data on the table and we studied it carefully for hours: in the end we shared assessments on GDP, inflation and economic performance. “Some members did not reach the same conclusion, some would have wanted a pause on the increases,” he said, but “a strong majority agreed” with the choice to adjust rates by 25 points. This is because inflation in Frankfurt can remain “very high for a very long time.”

Impact on mortgages

As we said, the new increase will bring an additional burden to those who use variable interest housing loans. According to Codacons’ estimates, the average variable rate mortgage amount, which varies between 125 thousand and 150 thousand euros for 25 years, is considered the most requested amount by those who use loans to buy a house in Italy. The monthly payment is expected to increase further, between 15 and 25 euros. If we take into account all the increases that the ECB has implemented since last year, monthly installments of variable rate mortgages will generally increase by between 270 and 365 euros compared to the amount paid in 2021, and the reflection of this on families will be between 3,240 and 4,380 euros per person. one more year.’s predictions are also in line, calling on the government to “once again extend the validity of the aid in favor of young borrowers, especially in such a sensitive economic context characterized by price increases and rising rates.” also highlights how this trend should reverse in 2024: Looking at June 2024 prices, the analyzed mortgage installment should fall to 731 euros against the current average of 760, and then reach 685 euros in June 2025. According to the statements of many experts today, the interest rate increase would have reached the ceiling. But lest Lagarde ever say never, she replied to those who asked if the growth season was over: “We are addicted to data.”

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Source: Today IT