Buying a 25 thousand euro car in installments today can cost up to 8200 euros more than in 2021. The fault of the increase in the cost of money established by the ECB in recent months. It is the banking union Fabi in an ad hoc study that accounts for Italian consumers in an era of constant rate hikes.
Indebted households in Italy are 6.8 millionequal to approximately 25% of the total: of these, 3 and a half million have a mortgage for the purchase of a house, according to Fabi. During 2022, interest rates on loans have increased significantly and new increases are inevitable with the cost of borrowing further increased to 3.75 percent. As for i new mortgagesthe installments of those a fixed rate are bound to double, while for those a variable rate the monthly “repayment” should go up by 50-60 per cent.
More in detail, for a new mortgage at a fixed rate of 200,000 euros over 25 years (the average rate applied by banks could be significantly higher than 5%), the monthly installment will be 1.218 euro; for a loan of 100,000 euros, again for 25 years, with an interest rate of 5.1%, the monthly installment will instead be 597 euro. As for the old mortgageson the other hand, no difference for those with a fixed rate, while the installments of those with a variable rate have suffered increases up to 65%. (segue)
At the end of February 2023, the total value of mortgage loans for the purchase of homes amounted to a 426 billion euros, up by 50 billion compared to the end of 2017 (+13.5%). Of the total of 25.7 million Italian families, those who have a mortgage are around 3.5 million, out of a total of precisely 6.8 million citizens in debt also with other forms of financing, such as consumer credit and personal loans. Between consumer credit and personal loans, banks have disbursed 253 billion euros of loans to citizensin line with the values at the end of 2017, but slowing down compared to the trend of recent months, a sign of the negative impact of the increase in interest rates.
The installments of the old fixed-rate mortgages, i.e. those disbursed until the end of 2021-beginning of 2022, do not change and will remain unchanged until the end of the repayment plan. The installments of old variable-rate mortgages have grown by an average of 65 percent. This means that whoever paid an installment of about 500 euros per monthpay today, per month, 825 euro that is to say 325 euros more. And it is very probable that the installments of the old variable rate mortgages could go up again. While new fixed rate mortgages have gone from a average interest of about 1.8% to one that exceeds 5% with the monthly installments which, therefore, can result, on the basis of the bank offers, even more than doubled compared to a year ago. New variable-rate mortgages, on the other hand, could soon reach an average of around 6% from 0.6% at the end of 2021: this means that for a loan 150.000 euro with a duration of 20 years, the monthly payment will be 1.090 euroa good 325 euros more (+63.9%) than what would have been obtained a year ago or 665 euros.
According to Fabi’s simulations, for a first home mortgage at a fixed rate of 5.3% for 200,000 euros over 25 years, the monthly installment will amount to 1,218 euros; for a 100,000 euro mortgage, again for 25 years, with a rate of 5.1%, the monthly installment will instead be 597 euro. From homes to cars or household appliances purchased in installments, at the end of 2021 the average interest rate was8,1%, in the light of the ECB’s decision, it could reach 12.8 per cent. And so to buy a 25,000 euro car entirely in installments, with a 10-year loan, the total cost goes from 37,426 euros to 45,704 euros, with an overall difference of 8,279 euros (+22.1%) compared to the rates of end 2021; to buy a 750-euro washing machine entirely in installments, with a 5-year loan, the total cost goes from 942 euros to 1,061 euros, with an overall difference of 119 euros (+25.3%) compared to the rates at the end of 2021.
“The umpteenth increase in the cost of money by the European Central Bank represents another very heavy boulder on bank loans and on the entire Italian economy – he commented Lando Maria Sileoni who has been driving Fabi for 13 years – There are two risks: a very strong slowdown of real estate market and construction and a very clear reduction of business investmentwhich will curb theoccupation. Like a film already seen, the decision of the American Federal Reserve was followed by the photocopied decision of the European Central Bank”.