ECB between inflation and SVB and Credit Suisse crisis. What happens now
What does the ECB's decision to raise the cost of money by 50 basis points mean for those who have taken out mortgage loans? The consequence of this decision involves a 52 percent increase in loan payments: this is how much more those who have taken out a mortgage have to pay, in total, over the past 18 months.
According to Facile.it's simulations, in the event that the ECB increase is reflected in a mirror-image manner directly on Euribor, for any standard variable-rate mortgage, the installment amount would rise from 456 euros in January 2022 to 693 euros in the second quarter of 2023.
What happened to SVB and Credit Suisse essentially changed the future expectations of the markets, which are now betting on smaller increases over the coming months.
More importantly, a new scenario has now opened up: the ECB could slow down, if not intersperse, the bullish trend.
Going by Euribor Futures, until a few days ago, the installment could have been as high as 740 euros during June.
Now, however, analysts predict that it could go over 700 euros.
To try to understand how installments have risen and how they might rise in the future after the new ECB rate hike, Facile.it looked at a €126,000 variable-rate mortgage taken out during January 2022.
The starting rate (Tan) used in the analysis is 0.67 percent, corresponding to a monthly installment of 456 euros.
Beginning in the second half of 2022, the European Central Bank decided to counter rising inflation by raising the cost of money several times, a choice that has contributed to the already significant rise in the variable mortgage rate (which came close to 4 percent in March 2023) increase that, as mentioned, does not seem destined to stop and indeed with the further increase in ECB rates by 0.50 percent, which could bring the monthly installment of the typical mortgage even to about 693 euros.
"To understand how borrowers' rates will change in reality, we will have to wait to see how Euribor will actually move, whose volatility has increased significantly in recent hours following the SVB and Credit Suisse events," Facile.it experts explain.
According to calculations made by Codacons, the increase in interest rates decided by the ECB means an increase in mortgage payments of 35 euros per family, at least for those who have opted for variable-rate financing.
Euribor, according to the association's estimate, stood at around 2.62 percent for the one-month one, while the three-month one stood at 2.82 percent.
In the event that the ECB increase were to be translated entirely to the market, this would mean that Euribor would rise to 3.12 percent (the one-month) and 3.32 percent (three-month).
Taking into consideration the average range of a variable-rate mortgage, with an amount between 125,000 and 150,000 euros, with a term of 25 years-which is the most popular amount in Italy-the installment is likely to increase between 30 and 40 euros.
Wanting to consider the increases since last year, as a result of the increases imposed by the ECB, families found themselves spending, in total, between 210 and 270 euros more per month for the mortgage installment.
We are talking about an annual expenditure, which has increased by at least 2,520 euros at best, touching 3,240 euros at worst.
Estimates, roughly, confirmed by Mutuionline, which explains that "compared to February last year, the installment of a variable, 140-thousand euro 20-year mortgage has increased, so far, by 25.3% (from 625 euros to 783 euros), and for a 250-thousand euro 30-year mortgage has grown by 43.7% (from 793 to 1,139 euros). With the further increase, the installment at 20 years will touch 819 euros and at 30 years 1,212 euros, with a further increase in the installment by 4.6 percent and 6.4 percent, respectively, compared to today."
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