ECB Rate Cut and the Consequences on Mortgages. The Simulations
All ready for the new ECB meeting. Many analysts are betting on a rate cut. While waiting to see the final verdict of the Eurotower, Facile.it has calculated that, with a 25 point cut base and the relative drop in Euribor, the benefit for the instalment of an average Italian variable mortgage would be around 18 euros.
But the good news doesn’t end here; already upon returning from vacation, borrowers with a variable rate could find a pleasant surprise; a reduction in the September installment of approximately 12 euros for an average recently taken out mortgage.
The reason for the decline is linked to the variation of the Euribor, the reference parameter for variable mortgages, which last month showed a significant downward trend with a drop of about 15 basis points; the 3-month index, for example, fell from 3.64% to 3.49% in August and this will have a positive impact on the pockets of Italians.
Even looking to the future, analyzing the trend of Futures on the 3-month Euribor (updated to September 4, 2024), favorable expectations emerge. The market expects the index to continue to decline in the year, with an overall decrease in the installments of an average borrower of around 38 euros by the end of 2024 and further decreases in 2025 that would lead to average installments decreasing, overall, by just over 85 euros by the middle of next year.
So, with data in hand, taking the trend of the mortgage installment medium variable – 126,000 euros in 25 years at 70%, subscribed at the beginning of 2022 – the instalment, which in August 2024 was equal to 733 euros (a good 277 euros more than the initial 456 euros), could drop to around 721 euros in September and then drop to 683 euros by the end of the year and to 634 euros by June 2025.
The decrease in variables However, it is not yet such as to have a significant impact on the banks’ offerings to new borrowers and fixed rate financing continues to be more advantageous.
Looking at the best offers** available online for a standard mortgage, fixed rates start from a TAN of 2.63%, i.e. a monthly payment of 574 euros (which drops to 563 euros in the case of a green mortgage).
Such low fixed rates also represent an opportunity for those who want to surrogate the mortgage, with TAN indices that looking at the best online offers start from 2.79%, that is to say an installment of 584 euros, it is not surprising to see how many borrowers have chosen to change banks, switching from variable to fixed; according to the Facile.it observatory in the first 8 months of 2024, surrogations represented 28% of the total request, a value that increased by 8 percentage points compared to 2023. As regards the best variable rates, however, the offers available online start at a rate (TAN) of 4.24%, with a monthly instalment of around 675 euros; a value that is lower than in previous months but, as mentioned, still higher than that linked to landlines.
Here’s how the rate has changed from January to today:
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