A financial shock is coming for families with the ECB rate reaching 4.25%. This is what Fabi, the Autonomous Federation of Italian Bankers, affirms. «Already tried by inflation and bill increases, Italian families have to deal with a new blow that has hit their pockets: the cost of money brought down to 4.25% by the European Central Bank on Thursday 27 July. The analysis of rates by size class of mortgage loans compared to the end of 2021 and 2022 shows a dramatic picture, almost comparable to a financial shock for Italians with variable rate mortgages or for those people who still intend to buy a house» says Fabi who continues : «Over the course of 12 months, in fact, the ECB’s inflation-cooling strategy overheated the portfolios of indebted Italian households. For all categories of mortgage loans for the purchase of homes, the run-up in prices followed the trend in ECB rates. All customers have experienced an average growth of 240 basis points, with rates that have had exponential growth and that exceed 4.5% in some areas of the country».
This is Fabi’s calculation: in March 2023, for mortgages of up to 125 thousand euros, the average rate on total loans in Italy rose to 4.47%, to 4.09% for the class of mortgages up to 250 thousand euros and, finally, 3.74% for amounts exceeding 250 thousand euros. It is a pity that the same Italian families, at the end of 2021, paid on average a rate between 1.49% for loans over 250 thousand euros, 1.71% for those between 125 thousand and 250 thousand euros and the 1.87% for smaller mortgages. These are average data, updated to last March, when the cost of money was still at 3.5%: the additional 0.75 points “added” in the following months will inevitably lead to new increases in interest applied to mortgages throughout the national territory, making the photograph taken even more serious. On the market today, mortgage rates have already largely exceeded, in some cases, the 6% threshold.
Most expensive mortgages in the South
According to the Fabi analysis, the average rates charged by banks are more expensive for Italian families living in Abruzzo, Basilicata, Calabria, Campania, Molise and Puglia (4.18%) and those residing in Sardinia and Sicily (4.18%) 23%) compared to the national average of 4.1%. In the northern regions, the conditions for accessing credit for buying real estate are more favorable than in the rest of the country: 4.09% in the North West (Liguria, Lombardy, Piedmont and Valle d’Aosta) and 3.99% in the North East ( Emilia Romagna, Friuli Venezia Giulia, Trentino Alto Adige and Veneto). In the Center (Lazio, Marche, Tuscany and Umbria) the most significant increases in the last two years with a spread of 251 points.
Some risk factors weigh, greater in the South and on the islands.
Greater price increases in the centre, the north-east less penalized by the increases
What happened with the rebound in rates was not uniform in all geographical areas of the country, with the Center appearing to be the area of the country affected by the greatest increases and the North-East, however, less penalized by the increases. Compared to the end of the year 2022, the rate differential in Italy has reached peaks of 40 basis points, for the class of mortgages of amounts contained within 125 thousand euros, up to 45 basis points for the lower one. In some areas of the country, such as the regions of the North East, the rate differential settled at 55 basis points (class up to 125 thousand euro) and 47 basis points for the islands (class up to 125 thousand euro). As for transactions up to €250,000, the most significant increases were seen in the North East and North West with spreads reaching 46 basis points. Finally, for the category of amounts exceeding €250,000, the greatest differences were found for the central and north-western regions, with differentials reaching 35 and 38 basis points.
Compared to the financing conditions existing at the end of 2021, the families most penalized by the rate adjustments are concentrated in the southern and central areas of the country where the cost of money has undergone larger increases. In particular, Central Italy is the geographical area that presents the most disastrous situation, with an increase greater than 266 basis points for loans up to 125 thousand euros, 246 basis points for those up to 250 thousand euros and 241 basis points for higher mortgages. The situation is similar for households in the South, where the lowest gap was recorded only for the class of mortgages up to 250 thousand euros, with a difference of 242 basis points, while the widest difference was recorded in the category of mortgages up to 125 thousand euros, with 256 basis points, while in the category referring to mortgages up to over 250 thousand euros, the difference was equal to 243 basis points. In the ranking of households, those in the North East suffered the effects of the rise in the cost of money to a lesser extent than the rest of the country: in this area the rate differential came close to 250 basis points for the amount class alone over 250 thousand euros, while for the other categories of mortgages the difference was between 222 (up to 125 thousand euros) and 259 (up to 250 thousand euros) basis points.
Confindustria: rates at the highest, credit too expensive
In July, the Fed raised the rate in the US to 5.50%, not excluding further hikes, but the markets consider this to be the last one. Even the ECB decided on another hike in July, to 4.25%, leaving the door open for further moves, judging inflation still too high. Overpriced and more scarce credit. Italian companies are undergoing a continuous increase in the cost of credit (4.81% in May). This is reducing the stock of bank credit (-2.9% annually in May). The Istat and Bank of Italy surveys show a tightening of the supply criteria (costs, amounts, maturities, guarantees), a demand held back by excessive costs, a significant share of businesses that do not obtain credit (6.0%), above all because waiver due to onerous conditions (56.3%). This was underlined by Congiuntura Flash of the Confindustria Study Centre