Will household and business mortgages fall? How much and when? All eyes are on Frankfurt, also because there could be a signal, after Mario Draghi’s report. Tomorrow the decision by Lagarde & Co. is coming. The second rate cut of the year is expected. There is talk of 25 basis points. Not the much hoped for 50 points? And then? Will there be another cut before the end of the year? And mortgages?
According to the simulations of Facile.it, a cut of 25 basis points would have an immediate impact on the Euribor, the reference rate for variable mortgages, with a direct benefit on the installments. An average Italian variable mortgage would see a reduction in the installment of about 18 euros. For those who have recently taken out a mortgage, there could be a reduction of about 12 euros as early as September. These drops are linked to the recent decrease in the 3-month Euribor, which went from 3.64% in July to 3.49% in August. Looking at Euribor Futures, the market expects a further drop in the index in 2024, with an overall drop in the installments of an average mortgage of about 38 euros by the end of the year and a further reduction of 85 euros by mid-2025.
Considering an average variable mortgage of €126,000 over 25 years taken out at the beginning of 2022, with a payment of €733 in August 2024 (€277 more than the initial €456), forecasts suggest that the payment could drop to around €721 in September, drop further to €683 by December 2024, and reach €634 by June 2025.
The rise in interest rates over the past two years has had a significant effect on mortgage demand, bringing it back to 2014 levels. According to an EY analysis reported by the Financial Times, in 2024 the growth of mortgage loans granted by banks will be zero, waiting for a reversal in the trend next year. Data from the European Banking Authority shows a reduction of almost 5 percentage points in mortgage lending compared to 2022. However, with the decline in inflation and the possible reduction of rates by the ECB, it is possible that in 2025 we could see a gradual recovery in mortgage demand, with new opportunities for Italian families.
In view of tomorrow’s ECB mortgage decision, the fixed rate continues to be the most convenient option in the short term. Frankfurt has the final say: will this second cut be enough to mark the beginning of a new phase of convenience for mortgages?
