Calano i rates. Again. The direct effect? The cost of mortgages will become “lighter”. The decision taken yesterday by the ECB will in fact be reflected in the funding dedicated to house purchases (purchases which, according to Crif, are on the rise since in September alone demand recorded +19 percent). Well, if we consider that the ECB rate cut could be completely absorbed by the three-month Euribor rate, the savings will certainly be felt in the pockets of consumers. According to Codacons, for example, the cut will lead to savings – on the most common types of mortgages in Italy – including between 13 and 30 euros per month.
Mortgages, what changes? The simulations
For a 20 year variable rate mortgage of an amount between 100 thousand and 200 thousand euros, the savings on the monthly instalment varies between 13 and 27 euros, equal to a lower annual expenditure of between -156 and -324 euros – analyses Codacons – If the financing has a duration of 30 years, the 0,25% rate cut will produce an average saving of between 15 and 30 euros on the monthly instalment, between -180 and -360 euros per year. For a 125 thousand euro mortgage for 25 years, instead, a similar cut translates into a saving of approximately 17 euros per month, with an impact of 204 euros on an annual basis.
What is certain is that the ECB's decision to cut the cost of money of 25 points, seen slowing inflation has a series of effects, both immediate and medium term, on citizens, businesses e governments.
Existing mortgages, lighter installments
Variable rate mortgages without caps in Italy are now a minority. Of the total 423,4 billion issued, approximately one third, 144 billion, it is at a variable rate and the remaining ones 279 billion are at fixed rate. But for those who still have such financing, the ECB's decision lightens an instalment that had skyrocketed in recent months. The instalments of old variable rate mortgages are grew up to 78% more. As underlined by an analysis by Fabi (Autonomous Federation of Italian Bankers), for a 150.000 euro loan for 20 years the monthly payment is 1.180 euros, a good 515 euros more than what would have been obtained two years ago, that is, 665 euros. Now the savings will be around 20 euros per month and is set to increase in the event of further cuts.
Mortgages, fixed or variable?
Market indices and bank offers had already anticipated the ECB decision. Rates have therefore already fallen in recent weeks and will fall further in the coming months. Mutuionline.it the variable is offered to a Average APR of 4,33% with peaks up to 3,86 %The average could drop to 4,08% in the next few days and even more during 2025. If the ECB were to continue with these choices, the variable would reach the fixed which on average now travels at 3,06% with peaks even up to 2,7%.
Rate cuts, a breath of fresh air for investments
The analyses of the ECB and the Bank of Italy indicate a low demand from businesses due to the economic stagnation and consequent decline in loans that has lasted for several months. However, high rates have also played a role in slowing down investments that now, with better monetary conditions, could recover.
Government bonds, yields fall
In the next auctions the Treasury will emerge lighter coupons to refinance the debt. The average yield measured by the Bank of Italy in October was 3,154 with a maximum of 4,049 of maturities over 20 years. On the contrary, the values of the securities in circulation on the secondary market could rise.
Stock Markets, What Effects?
The medium-long term consequences on the price lists of a more accommodating monetary policy are difficult to predict. There are too many variables, whether they are financial both geopolitical especially in a moment like the current one characterized by extremely high uncertainty.
How much will it cost to buy cars and appliances in installments?
At the same time, the new rate cut by the ECB is pushing Italians to request mortgages. And so: houses, cars and appliances How much does it cost to buy in installments with the cost of money at 3,25 percent? Fabi releases some data and forecasts on how credit to families in our country has changed, how they have already changed and how the interest rates practiced by banks to families could evolve. In Italy, there are 6,8 million indebted families, equal to approximately 25% of the total.: of these, 3 million have a mortgage to buy a house. During 2022 and 2023, interest rates on loans increased significantly with the cost of money gradually reaching 4,5% before falling back to 3,25%.
For some months, however, banks, in anticipation of a return to a less restrictive monetary policy by the Eurotower, have anticipated the expected reduction in rates and the decline could continue in the coming months. Hence, significant advantages for families, both for buying a house and for buying cars or household appliancesMortgage rates have already fallen to an average of 3,59% in August, from average levels above 5% in 2023, and could fall further to 3,20%: a reduction that will result, in the case of a 25-year home loan of 200.000 euros, in an overall saving of over 70.000 euros (-19,3%).
Consumer credit rates have fallen to an average of 8,58%, after peaks above 14%, and could fall further to 8,25%: this means that a 25.000 euro car bought entirely in installments, with a 10-year loan, will cost over 11.000 euros less (-23%) compared to 2023; while for a 750 euro washing machine, with a 5 year credit, the savings, in the next few months, will be 161 euros.
The Search: Tell Me How Old You Are and I'll Tell You What House You'll Buy
Not only that. According to a research by Changes Unipol elaborated by Ipsos, 34% of people looking for a house consider the reduction in the cost of money as an incentive to take out a mortgage, especially for the first home, while the push is less on second homes (16%) and on renovations (21%). The cut in rates, emerges from the research, represents an incentive to the first home mortgage especially among Gen Z youth (51%) while those most likely to renegotiate their mortgage are Millennial (47%). The desired further rate cut is, on average, 2,6% while for 6 out of 10 Italians an interest rate deemed unfavourable determines the decision to postpone the mortgage, especially among baby boomer (65%).
