Here comes a news on mortgages. This is an important change introduced in the budget package that will allow families to save a lot of money. “The old law of 2012 has been reinstated which allows mortgage loan contracts to return from variable to fixed rates,” announced Economy Minister Giancarlo Giorgetti. The transition will help many families who have variable mortgages and who, with the ongoing ECB rate hike, have found themselves with a much heavier installment at the end of the month. To give an example, taking into consideration a floating rate loan of 126,000 euros over 25 years signed in January 2022, since the beginning of the year the installment, which was initially equal to 456 euros, has risen to 637 euros. This is almost 40% more in just a few months.
How does it work
The rule obliges banks to accept the transition from variable to fixed for loans of up to 200,000 euros. The criteria provide for an ISEE of up to 35,000 euros. In any case, the calculations must be done correctly: the new rate may not necessarily be lower than the variable to be scrapped. However, the fixed rate will remain unchanged over time and will protect against future increases that are already expected in 2023.
The new law says that the new fixed rate will have to be chosen between the lower of the 10-year IRS and the IRS equal to the residual term of the existing mortgage. The spread envisaged in the loan agreement will be added to this rate (the spread is the bank’s profit).
For example, if the borrower has a 30-year mortgage and has paid two years of installments, he will have to look at the IRS at 25 because it is the one with the term closest to the residual term of his loan. It will use the lesser of the two Irs: the 25-year one is today at 2.33% while the 10-year one is at 2.86%. The hypothesis is of a spread of the bank at 1% and that today it pays a 3-month Euribor at 2.05% with a finite rate of 3.05%.
It means that the borrower will get a fixed rate at 3.33% which is one level higher than what he was paying for his variable. However, the passage will block the installment for the entire duration of the loan. «The savings will not be in the immediate future but in the future» underlines Guido Bertolino, business development manager of MutuiSupermarket.
It is a window for young people
“The rule especially affects those young people who obtorto collo took out a Consap variable rate after June, at a time when the fixed rate was no longer accessible, and today they find themselves on the back of a house with a long-to-value variable-rate mortgage” explains the ‘expert who then adds: «This type of borrower does not have the possibility of subrogating because it does not comply with the terms (at least six months’ installment must have been paid). If they wanted to subrogate, on the market they would find almost non-existent offers for this type of mortgage with high long-to-value and with rates at 4% and therefore it would not be convenient for them to make the switch. An important window is therefore opening up for this category».
Return to the variable
Nothing prevents you from going back and then subrogating while the residual capital has decreased. «In the meantime, however, those who take advantage of the new law will have avoided the hike coming next year with the expected increase in the Euribor. The futures curve in June indicates the Euribor at 3.5%. It is clear that the next few months will see price increases for those with variable mortgages.
How the switch will work
It must be said that it is not a substitute but a transformation. «A bit like in 2011, the borrower will be able to go to his bank and ask for the transformation from variable to fixed – explains Bertolino -. It will be necessary to bring the documentation certifying the ISEE while the bank will verify that the residual debt is under 200 thousand euros and that the mortgage has no unpaid or late installments ». After which the bank will indicate what the new rate is. He will not be able to refuse passage. Then the customer will do his calculations and decide. It seems there are no special costs. In addition, the intervention of the notary is not even necessary because it is not a subrogation but a renegotiation with your bank.