The increase in the spread is a sign of this: the cost of money is increasing. We are still in small adjustments, admittedly not dramatic, but it seems that the best is behind us for those who want to contract a fixed rate mortgage or has already contracted one at variable rate. The first is linked to the Eurirs in force during the term of the contract. For example, for a 20-year maturity, we went from -0.02% at the start of the year to 0.42% a few days ago.
In less than 10 months therefore, the 20-year Eurir rose 0.44%, or about half a percentage point. It is still very low, if we consider that in 2018 it had fallen to 1.50%. But the trend is clear. Instead, the variable rate mortgage it is mainly linked to the Euribor on the various maturities. And taking into account that at 3 months, it remained appreciably stable in the zone of -0.56%.
On a fixed rate mortgage of 100,000 euros, 20 years and a purchase contract for a first home in Rome worth 200,000 euros, the best offers currently impose an annual cost of between 0.86% and 0.99%. In the case of a variable rate mortgage, the best deals vary between 0.37% and 0.59%. These figures would tell us to what extent Italian banks are not yet forcing price increases on customers. If they had, compared to the start, they would have charged around $ 5,000 in heavier payments over the 20-year amortization period for a new fixed rate mortgage above.
Single Fixed Rate Mortgages Affected Currently
Why do they seem to only pay for the moment holders of a fixed rate mortgage and not yet a variable rate mortgage? The Euribor is affected by the evolution of the cost of silver on the short end (up to 12 months) of the curve.
And the market does not anticipate any rate hikes in the next few months, even though it is starting to forecast day to day rates 20 basis points in one year. In any case, they would remain negative by 0.30%.
Over the medium to long term, however, the increase in yields is evident due to the effect inflation. Consumer prices are skyrocketing and the cost of borrowing on long term loans can only follow. To pay the costs, it is precisely those who have mortgages linked to Eurirs. However, it is likely that the banks will not be quick to prick the customers of the same entity accused by the rise in rates in the market. And this for the simple fact that during the cuts they had reserved a margin to avoid issuing mortgage loans at too low rates, widening the spreads. These had avoided too drastic a drop in rates, but they should now act in the opposite direction, saving time for customers who want to borrow money or who have already done so at variable rates.