An increasing number of Italians are afraid of sudden changes in their mortgage payments. Young couples and families, as well as singles, are trying to understand how the mortgage market may change in 2024 to avoid unpleasant surprises. It all starts with the ECB’s interest rate decisions. But now that the Frankfurt institute seems to have blocked the increases for months, can we be sure? The answer is no, because if the experts’ predictions of a 1 percentage point interest rate cut by the end of the year are correct, it is also true that the crisis in the Red Sea could put everything into question. Let’s go in order.
Variable rate mortgages, -100 euros per installment until the end of the year
The first positive signs regarding new fixed-rate mortgages have emerged in recent months, thanks to the decline in the IRS index, and it is now estimated that those who decide to buy a home will save up to 24 thousand euros in three years. Variable interest rates for those who had already bought a home remained frozen after months of sharp installment increases. Suffice it to say that, according to Codacons’ report, in January you paid 454 euros more for a loan of 200 thousand euros for 20 years than three years ago, and you incur extra charges of 5,500 euros per year.
But now the Euribor is also slowly starting to fall, which means that we may see a slow but steady change of direction in variable rate mortgages already taken out, with a significant cut in the monthly installments payable in 2024. It may initially drop to just 10 euros per month and then drop to as low as 100 euros per month by the end of the year. Facile.it says this based on a review of Euribor futures. Using the recently signed 25-year variable mortgage of 126 thousand euros as a reference, he calculated that the December installment had risen to over 750 euros but could fall to 740 euros in early April. In the third quarter, this amount could fall by another 30 euros and then close the year at around 660 euros, almost 100 euros less than the December 2023 installment.
ECB, inflation and the nightmare crisis in the Red Sea
We are now waiting for the ECB meeting to be held on Thursday, January 25, to get confirmation that interest rate hikes will be stopped. The cost of money should remain constant, but uncertainty is increasing due to the Red Sea crisis even a few months ago. Some forecasts predict that attacks by Houthi rebels will disrupt maritime trade through the Suez Canal, causing a general increase in the prices of goods imported to Europe. As a result, inflation may begin to rise again. Some experts predict that the crisis in the Red Sea could contribute to a 2% price increase in the EU in 2024. So will the ECB change its plans?
It is too early to say, we will probably take the time to analyze the situation better but above all to assess what the long-term effects on inflation will be. Important signs may come from Lagarde’s speech, but we will have to wait until March to learn more. In fact, according to some analysts, the ECB may start to reduce the cost of its own money from the third month of the year, take a step back by 25 basis points and make the same reduction in June. Then, in the second half of the year, an intervention of -50 basis points will bring interest rates in Europe back to 3.50%. But it is a must.
Mortgages, cancellation of claims
In the meantime, we will have to deal with a possible “tightening” of supply policies for granting home loans to families. This was also supported in Bankitalia’s survey of bank lending in the euro area; reported that there was another decline in demand for financing for home purchases in the fourth quarter, and that there was a “small net increase” in demand in this quarter.
The eventual reversal of housing loan demands, which have been experiencing continuous declines since the beginning of 2022, indicates that the real estate sector is gradually recovering thanks to the ECB’s less aggressive policies.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
