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Variable mortgages have reversed their downward trend. But not for everyone. There are some cases of borrowers who in the month of January, instead of having their installment reduced, found a small but unexpected increase. How come? Starting from the concept that the mortgage rate is made up of two legs (Euribor indices and the spread decided by the bank) and that of these two legs only one can vary (i.e. the Euribors) the answer must, in fact, be found in the ways in which the banks the Euribors on which to determine the change in the rate are relevant. «There are some institutions that take the index at the end of the month, others take the monthly average and others, more simply, consider the mid-month Euribor – explains Stefano Rossini, CEO of MutuiSupermarket.it -. Since there is no single method used by credit institutions, it is understandable that in some cases there was no reduction in the installment in January and instead there may have been an increase. In any case, we are talking about variations, both downwards and upwards, of little importance because the Euribor indices have moved little recently. They are stabilizing while waiting to understand if and when the European Central Bank will actually cut rates.”
Method of recording the Euribor to index the variable mortgage
If we take the 3-month Euribor expiring in mid-December, this stood at 3.92%, lower than the current 3.93%. It is true that the Euribor, on all the main maturities (from 1 month to 1 year), are currently at slightly lower levels compared to the recent peaks in the 4% area. However, this does not mean, in fact, that all borrowers have already been aware of the January installment of the mini-savings that the moderate average drop in Euribor would suggest. Because, contract in hand, it is necessary to analyze on a case-by-case basis the methods of detection by the individual bank of the Euribor used to index the variable mortgage. Furthermore, there are some banks that use the 3-month Euribor index and update it not every month but every three months, so if the index was recorded at the end of September (for the October, November and December installments) and then new at the end of December (for the January, February, March installments) borrowers with Euribor updates every three months will certainly have seen the January installment increase because the 3-month Euribor in September was certainly lower than the 3-month Euribor months of December. Hence the increase in the installment recorded in January. The same reasoning then applies to the few banks that have updated the 6-month Euribor every six months, even those will have generated an increase in installments for the months of January – June 2024 because the 6-month Euribor at the end of June was lower than that of the end of December. Then there is another case that can explain the counter-trend increase in the last variable instalment, despite the Euribor’s downward trend. The amortization plan of mortgages taken out in Italy is defined as “French”: a mathematical calculation method which provides for the payment of most of the interest in the first years of the mortgage’s life. Consequently, some slightly older mortgages may have seen the January installment increase slightly due to a “natural” increase in the principal amount, greater than the possible drop in interest impacted by the slight decrease in Euribor.
«The good news – concludes Rossini – is that these technicalities should not affect the reduction of installments in the coming months if the downward trend in rates were to continue and become accentuated as a result of the cut measures expected by the ECB. Barring any surprises, from the February instalment, the vast majority of variable mortgages will see a reduction, albeit still slight, in the instalment.”