Mortgage interest rates show no sign of decreasing. Geopolitical tensions due to war in Ukraine and inflation take their toll on those seeking funding for the purchase of real estate, especially first home. Despite the efforts of the institutions, including at the European level, in March the average cost to open a mortgage to buy a house has grown significantly, returning to the levels of the end of 2019 (this is how the war in Ukraine changes mortgage rates).
Mortgages at 20 and 30 years: how much they cost us more
In the last month the fixed rate mortgages are gone up by half a pointfor an average increase of 120 euro cents compared to last year. As regards the variable rate, the increase appears to be very contained, in the order of 20 cents euros both on an annual basis and with respect to the data at the beginning of 2022 (here instead we have explained why the new 200 euro bonus will not be for everyone: those who are excluded).
The causes of this situation are to be found above all in the trend of the reference parameters for mortgages. The Eurirs, the reference for fixed rates, recorded a surge up to 1.80% at the end of April for twenty-year mortgages. The 30-year parameter, on the other hand, touched 1.50%, while the Euribor (reference for floating rates) still remains in negative territory, around -0.50%. The banks however, they continue to apply lower spreads for fixed loans, partially limiting the consequences of the rise.
Young people under 36, here’s what to expect
The economic situation does not spare either the under 36, previously privileged customers when it came to taking out a mortgage for the purchase of their first home. The advantageous fixed-rate conditions for young people would already be technically inapplicable. The rates, although subsidized, are in fact higher than the established maximum by the law in force: until next 30 June it will not be possible to grant loans at a subsidized rate for a weight greater than 1.92%.
Not only that: another blow to the real estate market comes from crisis of “subrogation” or “portability of the loan”, the contract that allows you to transfer the residual debt from the original bank free of charge to another credit institution that offers more advantageous conditions. A path that is no longer convenient to take, given that the rate of a new mortgage would turn out to be much more burdensome than the one the borrower has already turned on (here instead we talked about the news on the mobile bonus).
Fixed or floating rate? An example to understand
In early May MutuiOnLine has published a mortgage simulation to concretely understand how much the most requested financing formulas have increased, namely those at 20 or 30 years. The widening of the gap between fixed and variable rate mortgages is evident.
Assuming a mortgage from 180 thousand euros at a fixed rate over 20 years, the best option available on the market offers an installment of 916 euros, which however goes up to 934 euros if we refer to the average cost of interest rates. With the same objectives and conditions, the variable rate installments go down to 806 and 812 euros respectively. Taking into consideration a instead thirty-year mortgagethe fixed installments can reach 672 or 702 euros, while the variable ones can go down to 563 and 567 euros respectively.
The gap between the two formulas it is decidedly important, but at the moment not such as to prefer a formula with a variable rate. However, there is another factor to keep in mind: the probable increase in the Euribor by the end of the year.
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