Starfinancer

THE interest rates rise. If you need to take out a mortgage, here’s which one you should choose, depending on your age and budget

If until recently it was only a fear, now it is a certainty: mortgage interest rates start to rise again. The European Central Bank (ECB) has decided to raise interest rates for the first time in 11 years: from 1 July 2022 they will rise by 25 basis points and could happen again in September. The immediate result will also be an increase in interest rates mortgages for the purchase of the house. Blame inflation, but the move will weigh even more on family budgets, which is why a fixed-rate mortgage becomes cheaper.

Continued growth in interest rates: which mortgage is worthwhile

Based on calculations Codacons, it went from 0.53% on January 3 to 1.75% on May 31 (30-year IRS), from 0.57% to 1.86% (25-year IRS) and from 0.60 % to 1.97% (20-year IRS). Less changes have been made so far by the floating rate based on Euribor, but with the adjustment of the ECB, things will change.

The consumer association simulated some examples: a 35-year-old young man who today asks for a 100 thousand euro fixed-rate mortgage in Rome will end up paying up to 17 thousand euros more than what he would have paid at the beginning of the year, with an increase in spending of 588 euros per year and a monthly payment that grows by 50 euros. But what to choose, then? As the Bank of Italy explains, the fixed line is still the most “popular”, chosen in 61% of cases.

But the choice depends on the risk you are willing to take or can afford. The fixed rate now returns “to cost more than the variable one, but continues to protect more against the risks associated with future market fluctuations, the variable one does not” observes the website of Small and Medium Enterprises. “The floating rate is convenient when rates are low, while it is more expensive in a situation where rates rise“. Obviously, the length of the loan also weighs in the choice between the two possibilities: “Over a short term the floating rate risks will be loweri, on a 20 or 30 year mortgage they will be greater “underline the experts of SMEs, who do not neglect even the economic availability of those who take out a mortgage.

Why are all mortgage costs increasing?

The resumption of the interest rate race for mortgages was in the air and even the Bank of Italy had anticipated this phenomenon. But why? «What affects the trend in rates is the effect of uncertainty caused by the war in Ukraine. This in fact increased the consequences of inflation, which increased at the beginning of 2022, and in turn derived from the post-pandemic period »explains the lawyer Raffaella Grisafi, vice president of the Business and Consumers Observatory. «The current scenario involves a general increase in costs, which affects both interest and the various costs associated with a mortgage. What affects is not so much the spread itself as inflation “adds the expert. Just inflation drove a a future intervention by the ECB, the European Central Bank. Among the first concrete effects, however, there is also the limitation of the granting of mortgages.

No more 100% mortgages: what to do?

For example, as emerges from a survey byMutuiSupermarket.it Observatory, Crédit Agricole and Avvera of the Credem group no longer grant fixed rate mortgages for loans exceeding 80% of the value of the property to be purchased, and they are not the only institutions that have made this decision. Unicredit and Bper, on the other hand, have chosen not to provide mortgages to young couples – always at a fixed rate with Consap guarantee – followed by Banco Bpm, which has extended this policy to variable rate mortgages, while Banca Sella limits loans to 70% of the value of the house, in the case of mortgages to the under 36. The only institution that still goes against the tide is Ing, which gets 95% loans.

What changes for the youth mortgage

The first to pay for this turnaround are young people, who are notoriously more difficult to access loans. For them it is possible to access the First home bonus for under 36s, with specific offers under the Prima Casa Guarantee Fund. This is a program, launched in 2015 and strengthened with the Sostegni bis decree of May 2021, which raised the portion of the loan covered by the State for young people with an ISEE lower than 40 thousand euros from 50% to 80%. But some banks are suspending the offers related to this bonus. What to do? “First of all, it is necessary to check if the refusal is founded and what are the reasons, being careful not to be induced to sign different contracts that could have the sole purpose of diverting from those with the Bonus, which are instead more convenient for the consumer. Therefore, always ask for the reasons that led to refuse the request also to understand if the refusal derives from incomplete documentation, lack of requirements, lack of creditworthiness, therefore of the conditions for disbursing the loan – advises the expert – Requests to the bank must always be made via certified e-mail or registered letter so as to induce it to respond in writing within 60 days. Furthermore, it is always important to be attentive to any operators in the world of credit intermediation who promise advantageous rates and safe mortgages: it is always necessary to evaluate the costs of the service and assess whether it is actually adequate and convenient “.

What is more convenient now: fixed or variable rate?

But what is best to choose right now? “A distinction must first be made between those who already have a mortgage and those who intend to apply for it today – Grisafi said – For those who have a mortgage, the effects of an increase in the spread are limited. In fact, if it is at a fixed rate, the installments do not change for the entire duration of the loan. Even if the loan is at a variable rate, the increase in the spread does not lead to an automatic increase in the installment, since the most used reference rates, such as the Euribor, are not strictly linked to the trend in the spread “.

“It is different for those who apply for a mortgage today: currently the fixed-rate mortgage appears to be more expensive than the variable one and in general the estimates of long-term mortgages appear to be more expensive. However, another aspect must be considered, namely that it is never possible to say in the abstract whether a fixed or variable rate is advisable because it is not only the interest that affects the convenience of the loan, but mainly the characteristics of the consumer: disposes, the amount of the loan to be financed, the duration of the amortization of the loan and, last but not least, how much you risk with a possible increase in interest rates over the years “explains the expert.

“So we need to understand what our long-term assets and our risk appetite arefor example taking into account that a fixed rate that today appears higher than the variable on a long-term mortgage (and therefore more exposed to uncertainty) could be more suited to our needs because it ensures the certainty of the fixed amount without fear of risk to suffer the fluctuations of the market “concludes the lawyer.

Warnings: pay attention to rates

Finally, remember that you could always run into some “scam” or even illegal behavior, by those who offer loans at rates higher than those indicated (quarterly) by Bank of Italy, beyond which one ends up in the usury field. Until June 30, the maximum legal rate limit is 1.99% for fixed mortgages and 2.27% for variable ones. «The general advice for choosing a mortgage is to compare the offers before making any choice: always ask for the document European standardized information prospectus (so-called PIES) to each bank and compare the offers, remembering that the bank is obliged to apply the conditions promised in the pre-contractual phase – explains Grisafi – Also remember a valuable rule: the consumer always has the right to the portability of the loan, this allows you to change the institution in the case of a more convenient offer. So unlike how we are used to thinking “A mortgage is not forever” because it can be renegotiated (if the bank is available) or portability with the choice of a new and more convenient institution and at no cost to the consumer “.