Inflation is on the rise, official rates are on the rise and mortgage rates are on the rise. Those who are looking for a home today, more than ever, are faced with the dilemma between subscribing to a rent or of an mutual for the purchase. Which should more this year? Given the development of the economic conditions of families in recent years, between the reduction in purchasing power due to inflation, and perhaps work difficulties, it would seem that the choice may be directed more towards rents. But in reality the situation is very different: taking out a mortgage today is more convenient and flexible than taking out a rental. Let's see how.
A typical case for a mortgage: 30 years on 80% of the price
The premise, of course, is that at the basis of every choice it is also necessary to consider the financial situation of those who are looking for a home, with a thousand variables. But, as it turns out, at this moment for those who have an availability of resources equal to at least 20% of the price for the purchase of a house, a 30 year mortgage it costs less than the rent. If we only consider the averages of the four main Italian cities, which can be obtained from the survey updated throughout January 2023 of the Immobiliare it portal, Milano the average asking price for homes is 5.185 euros per square metre, compared with a monthly rent of 21,29 euros per metre. Assuming a fixed rate mortgage at 4% for 30 years, the monthly expense for the installment relating to the purchase of an 80-metre house is 1.584 euros, compared with a rent of 1.703.
In Capital the comparison gives as a result 1.012 euros of installment and 1.172 of rent, a Torino 588 against 793 and finally a Napoli for the you need 854 euros against 1000 for the rent.
A few more examples: "From our simulations, to buy a 65 sq. Naples of 25 euros and in Rome of 80. In the same cities and for the same housing typology, however, if one opted for rent, the rent would be respectively 1200 euros per month in Milan, 670 euros per month in Naples and 830 euros per month in Rome”, they tell the Tecnocasa research office.
Search for rent grows, but the offer is still linked by many difficulties
In the last few years the rental application has grown since years ago. Accomplices on the one hand the reduction in purchasing power due to the increase in inflation, on the other sometimes the difficulties of working, some families do not feel like taking on a mortgage. “Since the period of greatest Covid alert there has been a very strong recovery in the demand for rental houses, says Vincenzo De Tommaso, head of the idealista research office. But then when he starts looking, he doesn't find what he's looking for.
According to the portal, idealista.it, theoffer of houses for rent in the fourth quarter of 2022 on the whole national territory it decreased by 36%, after having already decreased by 43,5% in the previous quarter. “The offer recorded the 5th consecutive decrease in the last few quarters” continues De Tommaso.
If we then analyze the situations of the individual major cities, the phenomenon is even more significant: Roma scored a -60%, Milano -49% Napoli a -40% and Torino even a -81%.
Why doesn't a homeowner like to rent?
The reasons behind the supply shortage are in the first place of fiscal nature: for an owner opt for the dry coupon means giving up on recovery of inflation, as adherence to the facilitated tax regime is subject to the impossibility of applying the annual adjustment of the fee to the change in the Istat index. But there are also many others difficulties that worry a landlord who wants to rent out: the fact that they meet more and more often, also due to economic difficulties, "with tenants who after, maybe a couple of months, no longer pay, neither their consumption nor the rent, times for months or forever,” says a homeowner associated with a national union. "At that point we think about the eviction, but even here there are many difficulties and very long times, from two to 4 years, during which we must also continue to pay the tax to the State as if we were receiving the rent, condominium expenses and the tenant's bills, to which are added the substantial legal costs: an absolute failure that leads to not renting anymore”. Some owners then, in order not to keep the houses vacant, in some cases turn to short-term rentals.
“The choice between buying and renting is a complex one”, as he also confirms Fabiana Megliola, head of the Tecnocasa group research office, because the entire real estate market has increased. While on the one hand there was an increase in house purchase prices in 2022 (+1,8% according to their latest data), "so the situation would not seem the best for buying a house, given that prices and high rates” explains Megliola, “on the other hand, rents have also grown. At a national level, in fact, the latest data in our possession indicates an increase in rents of 2,1% for studio apartments, 2,4% for two-room apartments and 2,2% for three-room apartments”.
The mortgage alternative: cheaper under certain conditions
Not that it's not difficult take out a mortgage, given that an 80% loan as assumed, requires either additional guarantees from third parties, or an income with regular income that has a value at least three times the amount of the installment, net of any other loans requested (as for the car for example). ”To take out a mortgage“ of course there must then be i income requirements necessary to access credit, but if you have what it takes to buy, it would be better to take the big step because in the end you would find yourself the owner of a property with little extra effort”, added Megliola.
The mortgage? Today it is tailor made
There is another aspect in favor of the mortgage: today the rates are on average 4%, but if you choose the fixed rate they will not undergo increases under any circumstances, while when the cost of money starts to fall there are many alternatives. Yes, because if the world of rentals is bound by a thousand snares, the world of mortgages in recent years has become more flexible. According to the Mutuionline platform, mortgages can be divided into macro-categories, depending on the purpose, the interest rates applied, the duration and the repayment methods. Usually the characteristics of a contract are established by each bank, also with a view to personalizing the service as much as possible, they tell Mutuionline.
If then it is a first home, the contract gives you access to some facilities at the fiscal and specific level deductions. With the substitute then it is possible to transfer the residual debt of a first home loan already in progress to another bank, in order to obtain more favorable conditions and above all without costs. Or you can transfer an existing loan from one bank to another in cases not covered by the subrogation, in this case with costs to be assessed.
Rates according to need
Even in this area, you can find the rate that is most suitable for your situation and in any case you have the possibility, impossible in the past, to change it. Let's start with the fixed rate: it is linked to the IRS (Interest Rate Swap) index, it is established when the loan contract is stipulated and it remains constant for its entire duration, as well as the amount of all the installments. The variable on the other hand, it is established at the time the contract is stipulated but is then periodically recalculated for the entire duration of the loan based on the fluctuation of the Euribor, i.e. the reference interbank rate for variable-rate mortgages disseminated every day by the European Banking Federation, or of the reference rate of the European Central Bank (ECB rate). It involves a greater risk than the fixed rate as it follows the trend of the money market: if the cost of money falls, the installment decreases, otherwise it increases.
Currently, expectations still see increases by the ECB in the spring which should then be followed by a period of reductions, but the times and amounts cannot be known a priori. Then there's the fixed-rate variable: compared to a normal variable-rate mortgage, the installment is kept constant at the starting amount, and the effective duration of the repayment period will vary over time: if rates drop, the duration will be reduced, if rates rise, the duration will lengthen of the loan than originally envisaged.
Also interesting is the Capped rates (also called cap) variable rate: this is a variable rate which, however, provides for a predetermined maximum limit. There is also the option of a Mix, which can be modified at the deadlines and conditions established by the contract, or a part of the capital to be repaid at a fixed rate and the other at a variable rate or a Balanced which is made up of a fixed rate and a variable rate part, depending on the weight you want to give to the fixed and variable rate.
